No more money should be diverted to the 2012 Olympics from arts and heritage funds if the Games exceed their £9 billion budget, MPs will say today.

The Culture, Media and Sport Committee reveals in a highly critical report that it has deep concerns about the impact the loss of funds has had on the arts in Britain.

This year Tessa Jowell, the Culture Secretary, infuriated arts organisations by announcing that £675 million would be diverted from lottery money to help to fund the London Games after costs started spiral-ling out of control.

The Lottery Fund was already providing £1.5 billion for the Olympics and many gave warning that the second tranche of cuts would lead to the closure of thousands of community and arts projects in the next five years.

The Heritage Fund, which helps to finance museums and public art galleries, now faces losses of more than £160 million. Giving evidence to the committee, the Museum, Libraries and Archives Council said: “The cuts put at risk the opportunity to showcase our country and create a legacy to the Games.”

Tate Gallery chiefs told the committee that it would be “highly unfortunate” if the sporting celebrations were marred by gallery closures and restricted museum services in London.

Art and cultural organisations are also worried that private sector funding will be diverted from the arts. The committee’s report says: “As the London Organising Committee of the Olympic Games is seeking to raise substantial funds from the private sector for the Olympics, museums see it as inevitable that this funding will be sought from the same limited group of major sponsors which now support them, and that the increased competition will be weighted against them because of the Olympics’ high profile and priority.”

The MPs share the art and cultural groups’ concerns. “We question the balance between the funding, for example, for elite athletes to gain more medals, and the damage to our museum infrastructure and ability to illustrate to the world Britain’s cultural heritage,” the report says.

The MPs call on Ms Jowell to confirm that the diverted funds were merely a loan and would be repaid when the Games were finished.

At a briefing last week the London Development Agency indicated that a memorandum would be drawn up soon between the Government and the Mayor of London, setting out terms for any repayment of funds from land sale profits. John Whittingdale, the chairman of the Culture, Media and Sport Committee, said: “Museums have done well in recent years due to support from the lottery and the Renaissance in the Regions programme [a project to promote art institutions outside the capital].

“It would be a tragedy if the gains made were now put at risk due to funding being cut off. It is essential that the Government both continues to provide support to our museums, galleries and archives from public funds and creates greater incentives to encourage private giving, if we are to preserve and enhance our collections for the enjoyment of future generations.”

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