It was the highlight of the Blair years. Tessa Jowell stood on a podium in Singapore, beaming, as it was announced that London would be hosting the 2012 Olympics. The next day bombs went off around the capital, but that wasn’t going to deter a city already planning a vast rejuvenation of the East End, a basketball stadium, a cross-country course and a media village.

Now, as the country faces recession, hosting the biggest party in the world seems a bit extravagant. People need jobs and homes more than gold medals. But the Olympics Minister will not be put off.

There are Union Jacks flying triumphantly over her Central London office and her telephone number has been changed to 2012. The Olympics could, says Ms Jowell, actually help Britain to spend its way out of hard times.

“This is economic gold at a time of economic need,” she says, looking out of her window across Trafalgar Square, towards Big Ben and the London Eye. “It’s much more than a big party, although there will be the most extraordinary national celebration.

The world has changed utterly since the Red Arrows flew over London to celebrate the successful bid three years ago. “We bid in one economic climate and we’re staging the Games in another,” she says.

“The Olympics have become an economic stabilisation programme. It’s £6 billion of investment in 75,000 contracts to firms all over Britain. There will be new jobs, new homes. Nobody intended it to have this function but this is the effect.”

There will be no more money from the Treasury — but nor will there be overall cuts, says Ms Jowell. “The budget we settled before the global market went into freefall is the budget that we will still work within. There is no more money beyond the £9.325 billion. That’s sufficient. We’re spending less than half Beijing declared they were spending.”

Critics complain that pouring so much money into two weeks of sport looks like a gesture more appropriate to the age of irresponsibility than the era of austerity.

But Ms Jowell says the effect of the cash will last long after 2012. There will be 10,000 jobs created in construction, 12,000 in regeneration and 30,000 in staging the Games. Around 10 per cent of those currently building the Olympic park were previously unemployed.

It will be the UK Games in London, she insists — “the seating for the stadium will come from Huddersfield, the steel will come from Wigan, the Australian paralympic team have said they’re going to train in Wales”.

The east of London, among the poorest parts of the country, will benefit most. “The Olympic village will provide 2,700 homes not just for the athletes while they’re here during the Games but then for families in East London,” she says.

That may be wishful thinking. As property prices slump, the Government will be lucky to make the sort of return it had hoped for by selling the homes off. Ms Jowell still expects a profit, but says: “Certainly you wouldn’t want to sell the houses into the market now and the way in which they are sold will be very carefully timed.”

The credit crunch is, she admits, already hitting the Olympics hard. Companies involved in the building work have found it much harder to raise the money, meaning that there is a £500 million shortfall that may have to be filled from the Government’s contingency fund.

“There is certainly less private sector equity borrowing available both for the Olympic village and the media centre. We have to make sure that the construction continues. The availability of the contingency fund is the important issue.”

The minister is looking again at the plans for the media centre to see whether money can be saved. “Do we build a basic shed which accommodates the media but is then dismantled or do we invest extra money in construction in order to have a legacy but risk creating a white elephant? That is the discussion that is taking place; we will decide in the new year.”

Alistair Darling, not a sports fan, has been putting the squeeze on the Games across the board. At one recent meeting he asked the organisers why the basketball couldn’t be staged in an old shed somewhere else in London rather than in a £60 million purpose-built stadium in the Olympic park.

At home, Ms Jowell has started making jam and teaching her grandchildren to knit to prepare for the economic downturn — but there are not, she believes, many more savings to be made with the Olympics. “Since winning the bid we have taken £1.5 billion out of the costs. There’s a point at which there’s no more to take out . . . You could reduce this to a flat-pack, tin-shed Games, but then we probably wouldn’t have won it.”

The management consultants KPMG have been commissioned to assess if it is worth building the basketball stadium, the equestrian centre and the shooting facilities. “I want to be assured that spending the money for these venues is good value,” she says. “But don’t assume that moving venues would be cheaper; it could cost more.”

There are, she insists, no easy answers. “The basketball is vital. Twenty-two per cent of the audience in the first week of the Olympics go to basketball, so if you take the basketball out of the Olympic park there wouldn’t be very much going on there.”

Some people argue that the horse-riding should be moved to Badminton rather than staged in Greenwich Park, but she says: “It’s not as simple as that. Badminton doesn’t have the capacity to house the equestrians, there would have to be money spent on accommodation and security.”

The important thing was to take decisions and stick to them. “Boris [Johnson] talked about cutting back when he was first elected, he thought he could cut a swath through the budget. You may make some small savings but the way in which you guarantee that budgets will increase is if you meddle in decisions that have already been taken,” she says.

London is going to host the Olympics, so should, she says, do it well. “No one is going to want to get to 2012 and think ‘this is really tatty’. We have taken a decision to do the best Games we can. We’re investing £9 billion in regeneration but also for the privilege of hosting the Games.

“Just remember what the national mood was when we were celebrating the success of our teams in Beijing.” There will, she hopes, be even more medals for Team GB in 2012. “A home crowd is worth half a second. I think this is one of the greatest things that will happen in our lives — as a country we love these moments of national pride.”

What about Team Gordon Brown? Only a month ago the Prime Minister was being written off, but now he is back in the race. Ms Jowell, a close friend of Tony Blair, says: “People stopped listening to us and now they are listening to us again.”

With Peter Mandelson back in the Cabinet, and Alastair Campbell advising behind the scenes, she says: “The core creators of new Labour are back. I hope nobody now doubts that you can succeed if you govern from the centre of politics.”

Lord Mandelson, the Business Secretary, is said to have “dripped poison” about the Prime Minister into George Osborne’s ear over the taramasalata in Corfu but the Olympics Minister insists the animosity has gone.

“I wouldn’t even call it a truce,” says Ms Jowell. “Peter and Gordon had a very close relationship, they drifted apart, they had their difficulties but don’t underestimate the extent to which there’s a will to make sure the Government works.”

Lord Mandelson is, in her view, already making his mark in the Cabinet and the country. “He’s undoubtedly making a difference. He radiates clarity and confidence with business. He’s one of the most gifted political strategists. He’s also box office, he makes the whole thing come alive.”

Rather too much, some would say. The headlines have, since his return to the Government, been dominated by stories of yachts and billionaires and Russian oligarchs.

Mr Osborne has been caught in the headlines but Lord Mandelson is there in the shadows. Ms Jowell says her colleague did nothing wrong.

“When Peter was on [Oleg] Deripaska’s yacht he was not back in government,” she says. “Of course you have to be sensitive in Government to the image of government but Peter is highly attuned to those sorts of sensitivities.”

But she gave warning that Labour should beware of exploiting Mr Osborne’s present difficulties. “We must keep focused on the things that really matter to people, not allow the politics of celebrity to become a diversion,” she says. “Otherwise people will stop listening to us again.”

Track record

Born September 17, 1947

Family First marriage to a fellow Camden councillor, Roger Jowell. Second marriage to David Mills, an international corporate lawyer. They separated after a controversy surrounding Mr Mills’s business dealings in Italy. She has a son, a daughter and three stepchildren

Education St Margaret’s School for Girls, Aberdeen; University of Aberdeen; University of Edinburgh; Goldsmiths College, London

Career Psychiatric social worker and assistant director of the mental health charity Mind

Political career 1992, elected MP for Dulwich; 1997, appointed Minister of State in the Department of Health; 2001, appointed Secretary of State at the Department for Culture, Media and Sport

Quickfire five

Golf or riding? Riding
Chess or monopoly? Monopoly
100 metres or marathon? Marathon
Town or country? Town
Jane Eyre or Elizabeth Bennet? Jane Eyre Track record

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