Olympic Funding: Revised Memorandum of Understanding between the Government and the Mayor of London - June 2007
Introduction
1. In anticipation of a bid to host the 2012 Olympic and Paralympic Games in London (“the Olympic Games”) the Government and the Mayor of London entered into and published in June 2003 a Memorandum of Understanding (“the 2003 MOU”).
2. The 2003 MOU provided for a Public Sector Funding Package (“PSFP)”of £2,375 million to be made available for the Olympic Games and paragraph 23 stated that “in the event that additional public funds become available for the Olympic Games Ministers and the Mayor agree to review the arrangements within this memorandum of understanding.” The Secretary of State set out that in the event that we won the Games she would institute a detailed review of costs.
3. On 6th July 2005 London won the honour of hosting the Olympic Games
4. Following the bid win the Government carried out a thorough review of the costs of the Olympic Games which identified the requirement to meet additional costs and provisions for contingency. On 15 March 2007 the Secretary of State for Culture, Media and Sport (“the Secretary of State”) announced :
(1) substantial additional funding for the Olympic Games resulting in a revised provision of £9,325 million (“the revised funding package”) comprising :
Olympic Lottery:
£750 million as per the PSFP
Sports Lottery:
£340 million as per the PSFP
National Lottery:
£1,085 million ie an increased
provision of £675 million
Mayor:
£925 million ie an increased provision of £300 million (not funded from increases in Council Tax or Fares)
LDA:
£250 million as per the PSFP
Government:
£5,975 million additional provision (including provision for wider security and Policing)
Total funding provision £9,325 million
(2) The Mayor of London and I have agreed that we will re-write our Memorandum of Understanding and put in place profit-sharing arrangements to enable the Lottery and future regeneration needs of the local area to benefit from the returns on investment that we are making in the Olympic Park.
5. This revised MOU sets out the new understanding between the Government and the Mayor of London as to how the costs of the Olympic Games should be met and replaces the 2003 MOU. Its purpose is to provide an agreed framework for future decision making. It is not intended to be a legally binding document but it will be an important material consideration to be taken into account by the Government and the Mayor when making decisions in the future and can be taken forward via the LDA’s Section 10 grant-offer letter. Its operation is subject to the normal decision-making processes of the bodies involved.
The Funding Streams
6. The Mayor’s Funding:
a) The Mayor will provide a maximum of £625 million from the Olympic precept, as provided for in the original Memorandum of Understanding.
b) The amount to be raised through the council tax precept for the 2012 Games will be no more that £20 a year for a Band D council tax household and will be spread over the period 2006-07 to 2016-17.
c) In addition the Mayor has agreed to provide a further £300 million as provided for in the revised funding provision announced by the Secretary of State for Culture, Media and Sport on 15 March 2007. The timing of its availability will be matter for agreement between the Government and the Mayor. However, the first call on this funding will not be before 2010/11 and will be in tranches of no more than £100 million per annum.
d) The sourcing of the £300 million is a matter for the Mayor but the Mayor has confirmed that it will not be found from either an increase in the Council Tax precept or an increase in Fares. The Mayor is examining a range of approaches for meeting the £300 million.
e) The Mayor’s initial £625 million from the Council Tax precept will be provided until 31 March 2017 and will be mainly paid direct to the Olympic Delivery Authority (ODA), during the life of the ODA, for capital expenditure purposes within Greater London. Thereafter it will be paid to an appropriate residuary body. This does not preclude payments being made to other bodies and being used for legacy purposes, if appropriate.
The London Development Agency’s £250 million Funding
7. The London Development Agency will:
a) provide the ODA a grant of £250 million, on the same terms and conditions as the GLA’s grant funding to the ODA;
b) start payment in 2008-09 and conclude in 2012-13;
c) make payment in five equal annual tranches (of £50 million a year); and
d) may negotiate with the Department for Culture, Media and Sport, “DCMS” variations in the timing and amount of payments within the agreed total of £250 million. DCMS will seek DTI’s views on any change to the level and timing of payment.
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Lottery Funding
8. Whilst the Government contribute the largest share of the funding provision for the Olympic Games, referred to in Paragraph 4 of the Introduction above:
a) £675 million share of funding provision and contingency would need to be met from Lottery Funds on top of the £1.5 billion of Lottery Funding committed already; and
b) to the extent that the additional lottery funding is used the Government has announced (Secretary of State’s statement of 15 March 2007) that the aim will be to compensate for some of the lottery funding transferred from the other good causes by means of an agreement with the Mayor and the LDA to share the receipts from enhanced land values following the Games. This would “enable the lottery and future regeneration needs of the local area to benefit from the returns on the investment that we are making in the Olympic Park.”
c) Legislative changes may be needed either to pay the profits from the sale of land to the National Lottery Distribution Fund (NLDF) or direct to individual distributors.
Sharing of LDA capital receipts and other income
9. The land and property subject to the provisions of this MOU is that owned by the LDA within the boundary of the Olympic Park and land which has been acquired by the LDA outside the Olympic Park for the relocation of businesses from the Olympic Park (“the Land and Property”).
10. In order that any outstanding borrowings are repaid as soon as practicable, the LDA shall recover first its acquisition costs and disturbance compensation payments (which are not expected to exceed £650 million) from the proceeds from disposals of the relevant land and property.
11. After that, the proceeds of Land and Property disposals, as and when made, shall be split between DCMS and the LDA as follows:
a) so as to achieve in appropriate proportion £506 million to DCMS for the lottery funders (ie 75% of the £675 million lottery funding) and £125 million retained by the LDA (this is equivalent to 25% of its estimated remaining costs associated with the remediation and disposal of land and buildings within the boundary of the Olympic Park, including fees and holding costs relating to those disposals).
b) When a) above has been achieved, £169 million will be paid to DCMS for redistribution to the lottery funders (ie the final 25% of the £675 million lottery funding) and £375 million to the LDA (ie equivalent to the final 75% of its estimated remaining costs).
c) Thereafter, any further amounts received over and above those required to complete the repayments to the LDA will be subject to paragraph 15 below.
12. The costs to be reimbursed do not include the grant of £250 million referred to in paragraph 7 above and committed by the LDA to the Olympic funding as part of the original Public Sector Funding Package announced by the Government in 2003, nor the further £300 million contribution from the Mayor.
13. DCMS will allocate the funds it receives from the LDA to the Lottery distributors pro-rata to their contribution. DCMS, together with the GLA shall monitor and record the receipts received and repaid.
14. The costs to the LDA of the acquisition, remediation and disposal of the Land and Property (both those costs which it has paid and those for which it is liable) and buildings and the receipts obtained from such disposals shall be independently audited on the basis of information provided to DCMS by the LDA. The LDA shall make available to DCMS and to the independent auditors all relevant books and records.
15. Should any surplus arise the use of it will be determined separately at the time by agreement between the Government and the Mayor.
Review
16. The Government and the Mayor may agree to review this Memorandum of Understanding at any point, for instance, in the light of any material change in the LDA’s role and responsibilities and future government grant funding.
Recovery of Exchequer funds
17. Subject to the payments set out in paragraphs 11a – 11c being made nothing in this MOU shall prejudice the recovery of Government Grant where this has been used for the acquisition or remediation of assets which have been sold subsequently, where this is appropriate and in accordance with the requirements of Government Accounting.
These documents are available online in Adobe Acrobat (.pdf) format.
