LONDON’S Olympic planners face a new bill of up to £400m over the construction of the athletes’ village.

The extra cost will come as a fresh blow to officials after it emerged that the 2012 Games are likely to swallow up more than £5 billion in public funds — at least £1.6 billion more than the original estimates.

The Olympic village, the biggest construction contract for the Games, was originally to be built by a private company at a cost of

£1 billion and then converted into 5,000 homes that would be sold after the event.

The cost of the village is not included in the budget of the Olympic Delivery Authority (ODA), which is overseeing all construction work.

However, London and Continental Railways (LCR), which owns the site at Stratford, east London, and its development partner are expected to demand a subsidy of up to £300m to cover any profits they fail to make from the sale of the apartments.

“In usual circumstances you would release new-builds onto the market in small chunks in order to keep the price up,” said an insider.

“But in this case you are talking about 5,000 units hitting the market at the same time and there needs to be some way of subsidising the loss of profit that creates.”

LCR and the developers of the Olympic village are also expected to demand up to £100m in rent during the Games and to cover the cost of adapting the properties into flats once athletes have left.

The village is part of a bigger contract to develop retail and business premises at a new site, Stratford City.

A consortium led by Lend Lease, the Australian developer that built the Bluewater shopping centre in Kent, is likely to be awarded the £4 billion Stratford City contract by LCR and the ODA as early as this week.

Lend Lease, which built the athletes’ village at the Sydney Games in 2000, was run by David Higgins, chief executive of the ODA, although he no longer has any financial interest in its activities.

On Tuesday, Tessa Jowell, the Olympics minister, will come under pressure from MPs on the Commons culture select committee to explain the spiralling cost of the Games.

The original Olympics budget was £3.4 billion — £2.4 billion to build the venues and surrounding infrastructure and just over

£1 billion for regeneration work in east London. But last week Sir Roy McNulty, acting ODA chairman, admitted the cost to the public purse will be “significantly higher”.

An ODA spokesman said: “Negotiations are continuing in relation to the construction of the Olympic village.”

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