Olympics 'black hole' could hit Lottery fund

From today's Guardian...

Projects supported by the National Lottery could lose out if loans used to fund the Olympics cannot be recouped by land sales, it was reported today.In what is being described as a £1bn funding "black hole", the London Development Agency has suggested that property prices may not increase fast enough for the sale of land at the Olympic sites to generate the revenue owed to the National Lottery fund.
The London mayor, Ken Livingstone, knocked down these predictions as being "pessimistic", but conceded that a shortfall could mean decreased lottery funding.
The government estimated that it would earn around £1.8bn from the sale of land in East London after the Olympic games, according to figures included in a joint Memorandum of Understanding issued last summer by Livingstone and the culture secretary, Tessa Jowell. The figures were based on an ongoing rise in property values in Stratford over the past 20 years.However, if property value doesn't rise as steadily as expected, the sale of the land could generate only £800m - £1bn less than expected. The lower figure is based on an annual 6% rise, and is at the lower end of the range of expected revenue which had top limits of generating up to £2bn and £3bn. Those projections come from a report by the London Development Agency, which it says cannot be published because it contains commercially sensitive material.
The mayor said today: "On the most pessimistic assumption, taking the worst year out of the last 10, we get £800 million, which would repay all the debts we've incurred.
"Taking the average of the last 20 years, we would get £3 billion.
"We've gone for something midway between and so I think we're being quite cautious."
The Department of Culture, Media and Sport flatly denied a potential funding shortfall, while remaining optimistic about the original projections.
"There is no black hole," a DCMS spokesman said. "Historical evidence shows it is realistic to expect an increase [in property value] to achieve our goal of paying the lottery back."
He said the massive investment and regeneration in the area due to the Olympic games would boost the value of the property. But, he said, "No one can say how much land will be worth after the games. No one has a crystal ball."
That sentiment was mirrored by an LDA spokesman, who said the £1bn shortfall is a worst-case scenario.
"And I must stress it is only a scenario, it is not a prediction," the LDA spokesman said. "No one is able to predict what land values will be in 20 years' time, so we have to work on conservative estimates."
But the largest distributor of lottery monies, the Big Lottery Fund (BIG), says it will start to feel the crunch much sooner than 2012, when the Olympics will come to London. Of the £1bn diverted from the lottery to pay for the Olympics, two-thirds came from the BIG budget, which largely funds the voluntary and communities sector. Programmes currently funded by the distributor run until 2009, and won't be affected. But future funding from 2009 and 2010 will be reduced to 60-70% of current levels.
"It was a substantial diversion," said a BIG spokeswoman. "We took the major part of the hit."
Last year, in England alone, BIG received requests for £8.3bn in funding from 30,000 third-sector organisations and charities. As such, it can only fund one in 13 applicants. That level will go down in 2010 because of the money diverted to fund the Olympics.
The National Council for Voluntary Organisation said today that when it came to raiding the lottery funding coffers, enough was enough. A spokesman said: "We can't be in the position where the government is coming back to the lottery to look for increased funds for the games."
Other sectors funded by the lottery that could lose out from a thin return on Olympic Park property include the arts, heritage and sport.
The DCMS spokesman said that the arts sector - which had been vocal in its protests against using lottery money for the games - would ultimately profit from the Olympics.
"The arts should benefit from the global interest generated by the 2012 Olympic," the spokesman said. He said the cultural Olympiad, which lasts from when Britain receives the torch from Beijing until the games begin, will feature many festivals which will benefit the arts.
MPs are scheduled to vote this afternoon on whether or not to give more money to fund the games.

Footnote by me: It's worth pointing out that at least one of yesterday's newspapers carried the story that property prices were now falling at a rate almost equivalent to that of 20 years ago. While I agree that overall property has increased in price, it is worth pointing out the number of people who were then caught with "negative equity".