Ken Livingstone, the Mayor of London, and Tessa Jowell, the Olympics Minister, admitted yesterday that £675 million borrowed from the National Lottery for the 2012 Olympic Games might not be repaid if land sales from the Olympic Park fail to raise enough money.

The mayor’s financial adviser also suggested that the proportion of social housing required on Olympic land developments — set at 50 per cent — might have to fall to secure higher values.

The comments follow revelations in The Times that the amount of money that can be raised from selling off the 66 hectares (164 acres) of land in the Olympic park in East London, could be £1 billion less than predicted.

James Purnell, the Culture Secretary, tried to defuse the growing row by pledging that no more money would be taken from the National Lottery. Mr Purnell dismissed allegations of a £1 billion “black hole” insisting that the £9.3 billion Olympic package was robust. Under the original budget, the National Lottery had to pay £1.5 billion towards the Games. This was raised by £675 million last year when ministers trebled the Olympic bill to £9.3 billion.

As The Times reported yesterday,the London Development Agency (LDA) is now planning to raise £800 million from land sales, instead of the £1.8 billion expected by Mr Livingstone and Ms Jowell. The first sum depends on land values rising by 6 per cent per annum, while the second is based on 16 per cent increases,

Estate agents in East London said that 16 per cent was ludicrous and predicted rises of 4 to 6 per cent.

The estate agent Savills said that the market had peaked and the proposed high levels of affordable housing was likely to keep prices down.

Neale Coleman, financial director to Mr Livingstone, defended the mayor’s confidence that land sales would raise £1.8 billion. But he admitted that planners were at the mercy of the markets and anyone who was able to predict the price of a hectare of land in Stratford in 2013 was “either a fool or a genius”.

He told the Commons committee on Culture, Media and Sport that there was a “good chance” that a figure of £1 billion would be exceeded, generating extra cash for redevelopment projects.

The land would be sold at the optimum time to achieve higher sales, he said. But if a serious shortfall looked likely the value of the land could easily be boosted by reducing the requirement for 50 per cent affordable housing and 44 per cent family homes.

He admitted that he would be discussing with individual boroughs if they felt the ratio was too high.

Mr Livingstone said that on historic price increases the sales should reach £1.8 billion — near the midway point of a range of estimates between £800 million and £3 billion. He conceded that raising only £800 million “the worst scenario” would not be enough to pay back the National Lottery. Under a memorandum of understanding, the first £650 million raised from land sales have to be paid back to the LDA to cover the costs of buying the land. The remainder of the profits are to be shared proportionately with the National Lottery, which has lent £675 million.

Ms Jowell’s office also admitted that if the land sales fell short the £675 million may not be repaid to the National Lottery. A spokesman said that Ms Jowell hoped that enough money would be raised from the sales. “But the basic principle is that it is right that the lottery should fund the Games. The lottery funds good causes and there is no better cause than the Games. It is right that the lottery contributes to the Games.”

Manny Lewis, the LDA’s chief executive, told the committee that discussions were taking place with three football and rugby clubs who are interested in moving into the Olympic stadium after the Games. He said that Leyton Orient was one.

Footing the bill

£9.3bn
What 2012 Olympics will cost

£2.17bn
Amount put up by National Lottery

£675m
Amount due to be repaid

50%
Proportion of social housing

66
hectares to be sold for commercial development

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