The estimated cost of hosting the 2012 Olympics was “entirely unrealistic” at the time of London’s bid, a report by the public spending watchdog says today.

The Public Accounts Committee accuses the Government of ignoring factors such as a contingency provision, tax obligations and security requirements that resulted in an “astonishing” increase in the budget from £4 billion to £9.3 billion within two years of winning the Games.

MPs also say that the Department for Culture, Media and Sport is guilty of wishful thinking in its prediction that the private sector would contribute £738 million towards venues and infrastructure.

In a revised budget presented by Tessa Jowell, the Olympics Minister, in March 2007, that figure had fallen to £165 million, or less than 2 per cent of the total.

The updated budget also acknowledged that the cost of the Olympic village, which will house the competitors, would require a contribution of £175 million from the public sector.

The new £9.3 billion cost to the taxpayer of the Games included a contingency provision of £2.7 billion, which was absent from the bid in defiance of Treasury guidelines, the report said.

MPs expressed concern that the Olympic Delivery Authority (ODA) had already used £500 million of the contingency. They called for a clear audit trail, up-to-date cashflow forecasting and details of the benefits delivered in exchange for the £5.9 billion increase in public funding.

“It is now clear that the estimated cost at the time of the bid was entirely unrealistic,” Edward Leigh, the chairman of the committee, said. “Despite the astonishing increase in the level of public funding the department did not specify in detail precisely what will be delivered for this money.”

Ms Jowell repeated her promise that the £9.3 billion cost to the taxpayer would not rise.

“This is a complex project . . . We remain vigilant about costs but are heartened by progress so far and the International Olympic Committee’s view that we are ‘operationally and financially’ on track,” she said. The Olympics Minister has yet to deliver a detailed legacy plan. It was due this month but has been delayed by the mayoral elections and could be put back until after the Beijing Games.

Hugh Robertson, the Conservative Olympics spokesman, said: “Nearly three years after we won the bid, much of the promised legacy remains uncosted and unplanned.”

Lord Coe, in a speech to the IOC in July 2005, vowed to “enable young people through sport”. It is still not clear how this sporting legacy will be delivered. Grassroots sport has already complained of a £223 million funding cut after an extra £675 million was taken from the National Lottery to cover the rising Olympic bill.

The lottery is now providing £2.2 billion, or 23 per cent, of the total cost. The reimbursement of the extra £675 million is dependent on the sale of land after the event.

David Higgins, the chief executive of the ODA, defended the progress made since the committee heard its evidence last year. Construction on the 500-hectare site will start in June, three months early. “We have a realistic budget and adequate contingency and are confident that we can deliver within it,” he said. “Seventy-five pence of every pound we are spending is for long-term regeneration.”

Costs overrun

£4bn Original estimated cost of hosting Olympics

£9.3bn Revised estimate of cost

£738m Original estimate of private sector contribution towards cost

£165m Revised estimate of contribution