TREASURY officials fear that the cost of the London Olympic Games in 2012 will overrun by 60 per cent, it was revealed yesterday.

With final budgets yet to be agreed for construction, regeneration, VAT bills and security, it is estimated that the bill may be more than £6 billion. Ken Livingstone, the Mayor of London, revealeddetails of continuing negotiations with the Treasury and said he could not guarantee that Londoners would not face further rises in council tax as a result.

The spiralling cost of 2012 was hinted at last month by Jack Lemley, who resigned as chairman of the Olympic Delivery Authority (ODA), saying that he did not want to be associated with a project doomed to be over budget and behind schedule.

The new budget for London 2012 is expected to be made public early next year, when the ODA also hopes to publish its revised planning application for the main Olympic Park, in East London. The capital’s original bid for building the Games venues was set at £2.3 billion but it is widely accepted that the final figure will be much higher, not least because of extra security.

The regeneration of a rundown area of East London will cost about £1.5 billion and there is also an unresolved issue over VAT.

Another unknown cost is that of policing the Games and the city during the event. London’s security costs leapt when suicide bombers struck on July 7 last year, the day after it was announced as the host city for 2012. But the main issue in the financial negotations is the size of the contingency fund to be included to account for cost overruns.

Mr Livingstone told the London Assembly that the Treasury wanted to build a 60 per cent contingency fund into the budget. The mayor’s advisers favoured a 20 per cent fund and the ODA thought that 30 per cent would be adequate.

Sir Roy McNulty, acting chairman of the ODA, told the assembly that the infrastructure costs of 2012 would be significantly higher than that put forward during the bidding process for the Games. But he refused to say how much his authority had asked the Treasury to provide.

Sir Roy added: “An adequate contingency has to be allowed for a project that still has six years to run. I don’t expect to have an elastic budget which can increase without end — I expect there to be a ceiling on it.”

Mr Livingstone said that he found the Treasury’s proposal breathtaking and that, if agreed, it would amount to an invitation to developers to overbid and underperform. He was loath to allow any contingency.

The mayor said that he was personally committed to no further council tax rises for Londoners other than the 38p per week agreed for the Games.

But he added: “I may not be here in 18 months. Any guarantee I give about what happens in 2012 is not worth the paper it is written on.”

Mr Livingstone said he also believed that it had been right for Mr Lemley, 71, an American construction engineer, to leave the project. “After Jack Lemley returned from major heart surgery he did not have quite the same vibrancy he had before,” Mr Livingstone told the assembly. “Jack Lemley looked a lot more impressive before July than he did after July.”

The mayor said that he wanted Sir Roy to be appointed to the post full time.

Sir Roy conceded that there had been serious differences between members of the ODA and Mr Lemley but said that he was unaware of any health reasons behind the American’s retirement. He disagreed with Mr Lemley’s claims that the project was being delayed by political interference.

“The project is on track,” said Sir Roy, who added that the ODA welcomed the political scrutiny and involvement that Mr Lemley found “frustrating”.

Mr Lemley’s office in Boise, Idaho, also denied the mayor’s claim that he was in ill-health and said that he was working full time on a number of large construction projects in the United States.

Mr Lemley, who supervised the building of the Channel Tunnel, returned to work at his company last month and told his local newspaper that he had quit the 2012 project because of local politics. “I went there to build things, not to sit and talk about it. So I felt it best to leave the post and come home.”

Mr Lemley, nicknamed The Terminator for his no-nonsense style, has never quit a building project before. Although appointed last November he officially took up the chairmanship in March.

The ODA denied that it had leaked stories to the press to discredit Mr Lemley since his departure.

Damien Hockney, an independent member of the assembly, said: “Jack Lemley has done us a service because we haven’t been kept informed. We have been kept in the dark”.

THE GAMES IN NUMBERS

203 nations will compete in 26 sports at 31 venues

£1bn is due to be generated in global television rights with deals already agreed with the United States, Europe, Japan, the Middle East and Australia

£2.3bn the original projected costs of the facilities and Olympic Village

£1.5bn the cost of staging the event

80,000 spectators can be held in the Games main stadium. Capacity will be reduced to 25,000 after the Games

5,000 spectators will be able to watch swimming at the Aquatic Centre

9.3m tickets will be available for the Olympics and Paralympics

16,000 competitors and officials will take part

21,000 accredited media personnel will cover the Games

75,000 litres of milk and a million bottles of water are expected to be drunk by athletes in the Olympic village restaurant

240,000 people will be ferried to the Olympic park each hour — a train every 15 seconds