Department for Culture, Media and Sport 2-4 Cockspur Street Tel 020 7211 6255 Jonathan Stephens London SW1Y 5DH Fax 020 7211 6259 Permanent Secretary www.culture.gov.uk jonathan.stephens@

culture.gsi.gov.uk

Margaret Hodge MBE MP

Chair

PAC

House of Commons

SW1A 1AA 13th March 2012

Dear Chair,

Thank you for sending me a copy of the Committee’s latest report on “Preparations for the London 2012 Olympic and Paralympic Games”.

I will respond formally in due course. But in your speech to the Institute for Government on 20th January 2010 you said:

“It’s easy to grab a headline out of the work of the PAC. But that’s not what I want to be about.”

So I wanted immediately to challenge two inaccurate claims in the report and press release.

First, the report claims that only £100m of contingency remains. In fact, as I explained at the hearing without challenge from the NAO, more than £500m of unallocated contingency remains. Our latest quarterly report, three months on, still shows more than £500m of unallocated contingency. That contingency is for managing risks which may arise – but it’s in the nature of risks that they haven’t yet happened and some or all may never happen. So we haven’t yet spent or allocated the £500m of remaining contingency – and will only do so if risks materialise.

Second, the report claims the Games will cost £11bn. In fact, the public sector funding package remains at £9.3bn. The claims of extra costs are

either costs, such as purchase of the land, which have always been declared and will be recouped from post-Games development, meaning no net cost to the taxpayer; or

costs, such as the tourism budget, which are Government’s “business as usual” costs and not additional Olympic costs.

The end result of the PAC’s report has been to create a false perception that the

Department for Culture, Media and Sport

Olympic budget is overspent. This was foreseeable, and is untrue. Far from building confidence in the management of public spending, it has undermined the hard work put in to good risk and budget management.

We have much to learn and much still to deliver. We shall consider the rest of the Committee’s comment and recommendations in that spirit. But it does not encourage better management of other major public projects when successful delivery on track and within budget is treated in this way.

I am copying this letter to other members of the Committee, the Comptroller and Auditor General, the Secretary of State for Culture, Media, Sport and the Olympics, the shadow Minister for the Olympics, the Liberal Democrat spokesman on the Olympics and the Treasury Officer of Accounts.

Yours sincerely,

Jonathan Stephens