Ministers ignored evidence from their own experts who found scant social or economic justification for bidding for the 2012 Olympics, The Times has learnt.

A 250-page strategy document, signed off in December 2002 by Tony Blair as Prime Minister but selectively distributed, found little support for the claim that the Games would produce significant economic returns or more people playing sport.

The Game Plan document, whose findings are not widely known even in sport’s upper echelons, has emerged as Games chiefs meet today to agree funding cuts for Olympic sports such as basketball and hockey.

UK Sport, the funding agency for lottery cash, has a £79 million shortfall in its £300 million budget because hoped-for private sponsors have been hit by the credit crunch. The existence of the report will strengthen calls for an “Austerity Games” in the image of 1948, when London was last host city, as the recession forces a squeeze on public spending in 2012-13.

Leading economists and civil servants commissioned by the Prime Minister’s strategy unit and the Department for Culture, Media and Sport found that the main motivation for staging the 16-day event should be a morale-boosting national party.

John Clark, the report’s chief author, told The Times: “We concluded that countries should host the Olympics only for reasons of national celebration because the economic rationale is weak.”

Yet just a few months later, the Cabinet backed a bid on the ground that it would increase sports participation and regenerate East London, and Lord Coe sold the message to the International Olympic Committee in 2005.

Researched for nearly a year by ten experts, Game Plan was intended as a framework for sports policy for the next decade – in particular, whether Britain should bid for events such as the Olympics and the World Cup.

Instead it was quietly forgotten when it did not present a strong case for a bid. Civil servants watered down the findings but the final draft was still unhelpful to bid champions within the Government, an unnamed source told The Times.

“This was a robust report that showed why we should not bid for the Olympics but it was an inconvenient truth. Almost the moment the ink was dry, there was a volte-face,” said Stefan Szymanski, a professor at Cass Business School.

“The justification for bidding should have been based on evidence placed in the public domain. Instead key evidence was suppressed or ignored.”

The revelations raise the question of why ministers backed a bid citing reasons dismissed by their own experts. Tessa Jowell, the Olympics Minister who sponsored Game Plan, admitted this month that a bid would probably not have been pursued if a recession had been foreseen.

Alex Story, a former Olympic rower who monitors 2012 for the Taxpayers’ Alliance, said: “On both the cost and the benefits to youngsters, ministers oversold the Games. It was a false prospectus; they knew it was unrealistic.” The findings strengthen concerns there was no proper analysis of the Games, whose cost to the taxpayer has more than tripled from £2.4 billion during the bid to £9.3 billion today.

At the time, the Cabinet was split but the doubters – led by Gordon Brown, then the Chancellor – were persuaded by a funding package of lottery money and London tax receipts and the opportunity to revive the Crossrail project, which has since been delayed to 2016.

Game Plan examined five types of benefits widely used to make the case for investing in large-scale events: urban regeneration; sporting legacy; tourism; celebration and culture; and wider economic uplift.

It concluded: “The quantifiable evidence to support each of the perceived benefits for mega-events is weak . . . be clear that they appear to be more about celebration than economic return.”

The findings will fuel the debate about whether the Olympics will produce a fitter nation or just suck money away from community sport and charitable causes funded by the lottery.

Hugh Robertson, the Shadow Sports Minister, said: “By ruthlessly suppressing the report without addressing its conclusions, the Government has knowingly wasted huge amounts of public money that could have been used to improve sport in this country.”

Nearly £550 million of lottery funds have been diverted from grassroots sport to the Olympics, according to the CCPR, the umbrella body for national governing bodies of sport.

The National Campaign for the Arts estimates a loss of £300 million through the diversion of lottery funds to the Olympics.

How London team rallied support

- Paris was considered the front-runner to win the 2012 Games but London triumphed by 54 votes to 50 at the International Olympics Committee (IOC) ballot in Singapore

- About £10 million was contributed to the bid by London’s business community

- The London bid team hired a consultancy firm run by Jim Sloman, the former chief operating officer of the Sydney Games, to advise them

- In the Olympic torch relay to Athens, in which candidate cities showed off their enthusiasm and organisation, 80,000 people lined The Mall to cheer the runners

- 40 red double-decker buses were repainted and 35,000 posters put up around the city as part of the Back the Bid campaign to enthuse Londoners about the Games

- A survey, carried out a few days before Team GB paraded through the capital’s streets displaying their medals from Athens in 2004, suggested that 95 per cent of Londoners supported the bid

Source: London 2012 Organising Committee; Olympic Delivery Authority