Olympics minister comes under fire in Commons after admitting VAT was omitted from original costs

Olympics minister Tessa Jowell came under fire in the Commons yesterday after it was confirmed that London’s initial budget to stage the Games did not include VAT.

Jowell admitted that the 17.5% cost of VAT on the construction of venues and infrastructure was omitted from the original costings. Estimates for the eventual VAT bill vary between £1bn and £250m.

The culture secretary was confronted by the shadow sports spokesman Hugh Robertson who said he had been assured by Jowell that VAT would be waived on building the Olympic facilities.

But yesterday she said that it was still one of a number of issues still to be agreed as part of a public sector funding package for the Games.

The construction budget for the Games stands at £2.375bn plus £1.044bn for regeneration around the Olympic Village at Stratford, east London.

Discussions are taking place between the DCMS and the Treasury over including another £2bn of regeneration work in the Lower Lea Valley in the overall Olympic budget.