2012 funding plunges Games into fresh turmoil

Funding for the London Olympics has been thrown into chaos hours before MPs vote on raiding the Lottery to pay for the Games.

Fears also grew that council taxpayers in the capital could be left footing a soaring bill for 2012.

Evening Standard can reveal Culture Secretary James Purnell will today rule out taking any more from the Lottery to fund the Games, as £2.2 billion - including the cash subject to today's vote - is already being seized.

Mr Purnell will also announce that between £600 million and £1 billion extra will be raised for good causes from the Lottery over a decade from 2009, under the new contract signed in the summer with Camelot.

But despite 11th-hour talks with the Conservatives and Liberal Democrats last night, he faces a huge battle to persuade many MPs to back a £1.1 billion transfer from the Lottery to the Olympics today.

His hopes of winning cross-party support, already slim, were dealt a blow with reports of a £1 billion black hole in plans to repay at least £1.8 billion of Olympic costs from land sales afterwards.

Mr Purnell faces a showdown in the Commons with the Conservatives, who have drawn up rival plans on the use of Lottery cash for the Olympics.

They had demanded a promise that no more money will be siphoned from the Lottery and that the Government will publish cashflow forecasts for the Games to show costs are not spiralling.

Shadow culture secretary Jeremy Hunt met Mr Purnell last night but was not given any assurances. Afterwards, Mr Hunt said: "This is the last chance saloon for the Government to restore credibility to the Olympic budget after it was spectacularly forced to triple it last March [to £9.3 billion]."

However, the Evening Standard has been told Mr Purnell will today announce a guarantee to safeguard the Lottery from further cash grabs.

A Whitehall source said: "James has been pressing the Treasury and they have agreed to rule out any further transfer from the Lottery to fund the Olympics."

Such a guarantee will be welcomed by arts, sport and heritage groups who feared their grants could be cut further.

However, given that the Olympic budget has already soared so dramatically, the pledge leaves open the question of who would meet any shortfall if the costs were to rise even higher.

There are fears the burden could fall to London council tax payers. Mayor Ken Livingstone has said he would rather resign than break a pledge that the weekly average cost to a household in the capital will stay at 38p a week for up to 12 years.

But Chancellor Alistair Darling, already mired in the Northern Rock crisis, will not want to have to bail out the Olympics from public funds as well.

Before voting through the £1.1 billion transfer, Conservatives will need to be convinced that the guarantee is cast-iron and the Government will be more transparent about the Olympic budget.

Today Mr Hunt will propose that £675 million of the £1.1 billion be raised by stopping Lotto cash for ministers' "pet projects" on education, health and the environment. This would mean a shake-up of good causes, restoring them to their original four categories: sport, arts, heritage and charities. The Lib-Dems appeared unlikely to vote against the transfer after culture spokesman Don Foster held talks with Mr Purnell on different sources of Olympic funding, more cash for good causes, and restrictions on Olympic Lottery games.

The House of Lords must also pass the measure but it traditionally does not oppose the Government's financial orders.

Mr Purnell said the cash transfer was vital: "Without the Lottery, the UK would be a very different place. There would be no Tate Modern, no new Wembley, and no Millennium Bridge ... And no Olympic Games in 2012."