Ross Clark

London’s real Olympic legacy: paying to build the stadium twice

The full cost of the 2012 Olympic Games is still far from clear

London’s real Olympic legacy: paying to build the stadium twice
Text settings

In 2006, on the day that the government’s estimated cost for the 2012 Olympics was jacked up from £2.75 billion to £4.25 billion, I promised to eat my hat on the steps of the Olympic stadium if the bill came to less than £10 billion. Although the official figure now stands at a mere £8.92 billion, it is a feast I am going to postpone, because we haven’t heard the last of Olympic overspending.

Two weeks ago, the London Legacy Development Corporation announced that the value of the contract with Balfour Beatty to convert the stadium for use by West Ham Football Club is to be increased from £154 million to £189.9 million. The new roof, it explained, is proving to be more complex than had at first been realised. At least we will have the consolation of getting into Guinness World Records for the longest single-span cantilevered stadium roof in the world, but Britain won’t be landing a gold medal for financial efficiency. The Olympic Legacy Development Corporation confirmed to me that the £189.9 million doesn’t include the cost of the retractable seating that will let the lower tier be rolled across the athletics track for football matches and retracted for athletics. This work has yet to be awarded. The corporation won’t say what it expects this to cost, claiming commercial sensitivity, but it has been estimated in the construction press at £20 million. Neither does the contract include the cost of fitting the stadium with the bars and restaurants which Premiership football demands.

How can it cost £200 million or more — once those extra bills come in — to convert an 80,000-seat athletics stadium to a 60,000-seat football/multi-use stadium? It cost Arsenal just £390 million to build the Emirates stadium in 2006 — and that included the cost of relocating a waste and recycling site, as well as several light industrial premises that had stood on the land.

When the details of the Olympic bid were announced under the then Labour government, the stadium was supposed to set an example of how to avoid ending up with a white elephant, as so many other Olympic cities have done. What would be an 80,000-seat stadium for the Games would turn afterwards into a more manageable 25,000-seat athletics venue. But the plan was deeply flawed from the beginning. Few athletics events are capable of commanding audiences of even 25,000, while the possibility of using the stadium for other events such as concerts was severely compromised by the fact that the reduced stadium would have no roof. Moreover, the cost of building a supposedly budget stadium soared from an estimated £250 million at the time the bid was launched to an eventual £429 million. To take off the upper tier of seating was going to cost a further £36 million.

When the Boris regime arrived at City Hall in 2008, the plan quickly changed, and the possibility of retaining a larger stadium for football was favoured. The only trouble is that football clubs and their fans, especially Premiership ones, don’t like their pitches encircled by athletics tracks, which put distance between the crowd and the players and make it harder for the fans to abuse the ref and linesmen. Premiership football also demands hospitality boxes, bars and restaurants. Moreover, football being a winter game, fans don’t like getting wet — and the original roof only covered some of the seats.

The result was the extraordinary bill for a new roof. Were it being paid by West Ham United, which won the right to use the stadium after a protracted legal battle with Spurs and Leyton Orient, few would complain. Yet West Ham are putting down remarkably little money up front. The club’s contribution to the conversion will stay at £15 million, in return for which it will receive a 99-year concession giving it the priority use of the ground for 11 months of the year. Other uses will get a look-in, such as the Rugby World Cup and World Athletics Championships, but they will be limited to July and occasional holes in the football season.

West Ham is getting the right to use the stadium for a century for just £3 million more than it paid for a single player, Enner Valencia, in the summer. The £15 million contribution is considerably less than the £71 million at which West Ham’s accounts value its current ground at Upton Park, which it has agreed to sell to housing developer Galliard.

In addition to the £15 million contribution up front, West Ham will pay rent which the legacy corporation say will amount to ‘several million’ a year. That could mean a reasonable return, if the tenant stays. What happens if West Ham decide to leave the Olympic stadium after a few seasons isn’t clear. The legacy corporation declined to reveal whether there are any break clauses in the contract which would let West Ham leave before the 99 years are up — I am told only that it believes the contract is ‘sufficiently robust to account for all scenarios’. West Ham might be in the Premiership now, but whether they would still be prepared or able to spend several million a year renting the stadium if they were relegated to a lower division — as they have been several times in the past — is another matter.

As for the £175 million up-front costs which are not being paid by West Ham, some will come from land sales within the Olympic Park and £36 million will come from the original legacy budget — the money that was to have been spent removing the upper tier of seats. Another £25 million has been granted by the government. Meanwhile, Newham taxpayers are being fingered for £40 million. In return, Newham council will receive a 35 per cent share in the lease, giving it a share in income from the stadium. It will also have the right to hold ten mass community events for Newham residents every year. The council couldn’t tell me exactly what these events,would be, except that it might include a rather grand sports day for Newham schools. The council will also bag 100,000 free tickets a year to West Ham matches. A spokesman denied that they will be going to the likes of Sir Robin Wales, Newham’s £81,000-a-year elected mayor, saying that they will be distributed instead among people who do voluntary work.

The deluge of free tickets hasn’t pleased Barry Hearn, manager of Leyton Orient, a struggling League One side which now finds itself having to compete for fans against a much richer neighbour which is showering locals with free tickets thanks to taxpayers’ largesse. West Ham’s deal is, Hearn says, ‘state sponsorship beyond my wildest dreams’.

Newham also claims another benefit from its £40 million contribution. Most of the jobs at the revamped stadium, says the council, will be filled exclusively through Workplace, the council’s Job Centre-type service, which is reserved for Newham residents. It seems extraordinary, given all the legislation against discrimination in the workplace, that a council should be able to reserve jobs for its residents — and to use taxpayers’ money to do so. It isn’t quite in the spirit of the European single market: while David Cameron is struggling to block the free movement of labour from Poland, Newham is trying to stop people from Tower Hamlets and Redbridge getting a job within its boundaries.

The tragedy is that we have ended up with two national stadiums — Wembley and the Olympic stadium — when one would have done. But that error having been made, did taxpayers need to be stung effectively to build the Olympic stadium twice, so that it could be handed over to a football club?

There is another scandal sitting across the Olympic Park: Stratford International railway station, in which £1 billion was invested in the expectation that Eurostar trains would stop there. Five years after it was finished not a single one does, unless Newham counts as a foreign country now it is operating a closed-borders policy.

The London Legacy Development Corporation has been fortunate in that the post-Olympics period has coincided with another mad London property boom, which has inflated the value of the sites within the park which the corporation has to sell, and let it so far absorb the soaring stadium conversion costs. But once again, in spite of the promises that London would be a model, the Olympics has left an enormous white elephant which is going to require substantial surgery in order to gain it an afterlife. My hat is staying uneaten until at least West Ham have moved into the stadium and the final conversion costs have become clear.