LONDON’S bid to stage the 2012 Olympic Games suffered a setback yesterday when the campaign team were forced into an embarrassing climbdown.

Having been dogged by controversy in the past, the International Olympic Committee (IOC) is determined that no allegations of wrongdoing can be levelled at its members this time around. Accordingly, it launched an investigation into possible rule violations by London and New York, which is also bidding to stage the Olympics.

The capital had announced a £15m package of financial incentives for athletes and Olympic committees, including training subsidies, flexible, round-trip economy air fares for all teams travelling to the Games, free phone calls for athletes, free train travel throughout Britain after the games and discounts at restaurants, shops and theatres. Countries would receive a further £30,000 to encourage their athletes to train in Britain.

But bid chairman Lord Coe announced it had all been withdrawn yesterday as London desperately tried to save face and avoid a formal reprimand by the IOC, something which would almost certainly doom the British bid to failure.

It remains to be seen whether London has now done enough to get its bid back on track. The IOC ethics commission has yet to announce whether or not it will drop its inquiry, although it appears that an innocent mistake has been made. London’s proposals were announced last week during an Olympic gathering in Berlin, the last big chance for bid cities to make pitches in the final stretch of the campaign. London and New York are competing against Paris, Madrid and Moscow, and the IOC will select the host city on July 6 in Singapore.

The problem is that the financial incentives should have been included in the city’s original detailed bid. The campaign team claim they were included in principle, but not in specific detail.

New York has already been cleared of any breach, with the IOC deciding that the city’s promise to promote all 28 Olympic sports for nothing in the run-up to 2012 did not break the rules because it had been included in its original bid, which was presented to the IOC seven days ago. Federations will get free office space, with computers, phones and staff.

It seems clear the London campaign team realise that they have broken the rules and are now trying to make the best of a bad job. They had maintained that the general outline of their proposals, if not the specific detail, were in the original application. Sports minister Richard Caborn said: “Those involved in the bid genuinely thought that they were working within the rules, but clearly mistakes have been made, and (IOC president) Jacques Rogge’s intervention has been enough for them to reconsider, which they have done. They have done the right thing.”

Rogge has warned that cities could be forced to withdraw any offers not included in their original proposals because he wants to avoid a bidding war, and any hint of the scandal that has haunted the Olympic movement — delegates accepted bribes to vote in favour of Salt Lake City being awarded the 2002 Winter Games.

“The IOC president has made clear that all candidate cities need to avoid a bidding war in the race to host the Olympic and Paralympic Games in 2012,” London 2012 said in a statement.

“In light of his remarks and the importance of London 2012’s commitment to working in close cooperation with the IOC, we feel it is in the best interests of the Olympic movement to withdraw the charters at this stage.”

Mike Lee, a spokesman for London 2012, insisted yesterday’s move was not a serious setback and felt it would not affect the bid.

“It is a sensible decision,” said Lee. “We understand President Rogge’s desire to avoid a bidding war, and that is why we have acted.

“Once he had spoken about the campaign of the candidate cities, it made sense to fully reflect on his remarks. That’s exactly what we have done.”

However, one adviser to Paris, which is favourite to get the Games, claimed London’s tactics “come close to being immoral”.