Ken Livingstone predicted today that the London 2012 Olympics would end up making a profit despite massive cost overruns confirmed yesterday by the Cabinet minister in charge of the project.

A day after Tessa Jowell, the Culture Secretary, admitted that the cost of building the main Olympic venues had soared by 40 per cent before construction work even begins in East London, the London Mayor said that everything was going "exactly according to plan".

Ms Jowell told a committee of MPs that the cost of the Olympic Park had risen from slightly under £2.4 billion to some £3.3 billion, a rise of £900 million in the 15 months since London beat Paris for the chance to host the Games.

Of that, £400 million was being paid to a consortium of consultants whose job it was to keep a budgetary lid on the whole project.

On top of that, tax-payers and lottery-players will have to absorb other direct Olympic costs that have not yet been properly worked out, including a massive security operation, VAT costs of between £250 million and £1 billion and a contingency fund that the Treasury wants to set at 60 per cent of the total budget.

With regeneration costs of around £1.5 billion, the total bill already looks set to exceed £7 billion.

But Mr Livingstone told BBC Radio 4's Today programme that the consultants would only, in fact, be charging £250 million for their work, which would end up cheaper than relying on a "committee of civil servants" to deliver the project.

"It is not Alice In Wonderland," he said. "Nothing’s a mess. Everything’s going exactly according to plan."

Mr Livingstone said that "big extra costs" expected would have nothing to do with the Olympics themselves but were because the original estimate had not included the infrastructure needed for the 35,000 to 40,000 new homes to be build in the Lea Valley after the Games.

"It would be madness to build the Olympic Games, then dig a large part of it up to put in the infrastructure," he said.

"So we are saying to Government, and so far Government is up for this, that we should spend another £1.5 billion to put in the infrastructure that allows us to build those 35,000 to 40,000 homes in the 20 years that follows."

Mr Livingstone added: "I'll make a prediction for you now - and providing Londoners re-elect me I'll actually be around to honour it - that these Games will make a profit.

"We have taken the most run-down and polluted place in southern England and on the back of the Games we're going to regenerate it. It will be a vibrant new area, not just 40,000 homes in total but perhaps 50,000 new jobs. It will produce tax revenues on a grand scale."

Despite the increases, Mr Livingstone said that he was "pretty determined and certain" that the cost to the London council tax-payer could be held at 38p a week.

He dismissed claims by the former head of the Olympic Delivery Authority, the US contractor Jack Lemley, that he had quit because he feared that the project was running late and over budget. He said that Mr Lemley had to leave after undergoing major surgery - a claim that Mr Lemley has already denied.

"I saw him before and I saw him afterwards," Mr Livingstone said. "He was fine before. After he came back from that surgery he was not the man he was before - he wasn't delivering and it was time for him to go."

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