The American engineer who quit as head of the London Olympics construction programme has become embroiled in a ferocious war of words with the Government after he claimed that his repeated warnings about the spiralling costs were ignored.

Jack Lemley, who resigned as chairman of the Olympic Development Authority in October, said that the Government was in denial about the true costs of the Games, and that the budget was unrealistic.

Speaking publicly for the first time since his abrupt resignation, he said that the financial estimates were a “swamp” and that “a blind man could see” the difficulties in preparing the East London Olympic site, but all the Government “wanted to hear is good news”.

His accusations against Tessa Jowell, the Culture Secretary, who has Cabinet responsibility for the Olympics, are particularly embarrassing because last month she was forced to admit that the costs had already grown by 40 per cent from an estimated £2.4 billion to an estimated £3.3 billion.

Last night Ms Jowell’s office hit back, effectively calling Mr Lemley a liar. It issued a statement accusing him of “trying to rewrite history on an epic scale” and of making “a number of assertions he must know are untrue”. It insisted: “It is categorically untrue that Mr Lemley tried to raise issues and was ignored.”

The 71-year-old millionaire, who was appointed honorary CBE for masterminding the construction of the Channel Tunnel, said that it was obvious from his first visit to the Olympic site that clearing up the chemical contamination would cost far more than the Government estimated.

He said that he warned John Prescott, the Deputy Prime Minister, and Ms Jowell, that there was a problem with contamination of the Lea Valley site even before he was hired.

“A blind man could see there was a huge environmental problem. I thought it was highly likely they underestimated. I talked to Tessa Jowell’s senior people . . . almost on a daily basis about this,” he told The Mail on Sunday, adding that his request for a site assessment was refused.

He said that in April and May KPMG, the accountant, conducted a study on the overall costs, which identified several things left out of the original estimate, including VAT and security costs. Ms Jowell has said that she was in the dark about the VAT bill but Mr Lemley said: “Hell, Tessa Jowell knew exactly about the VAT.”

The Department for Culture, Media and Sport said: “Mr Lemley . . . makes a number of assertions he must know are untrue. On costs, we, not he, initiated a full-scale cost review, working with KPMG.”

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