Olympics could be hit by tax bill

New controversy has erupted after it emerged that organisers of the 2012 Olympic Games are facing the possibility of an additional £250m tax bill.

Culture secretary Tessa Jowell said in the House of Commons that the budget for the construction programme outlined in the bid – an estimated £2.38bn – did not include VAT.

At this point, the Treasury has indicated that due to restrictions from the European Union, the bill may be handed on to the Olympic Delivery Authority (ODA).

Jowell responded angrily to claims from shadow sports minister, Hugh Robertson, that he had received "a personal assurance" that VAT would not be levied on the construction of Olympic venues.

Jowell replied: "This is quite disgraceful. I had a conversation with you in which, in complete frankness, I told you what the position was at the time."

She added that the bid had not included VAT, as the ODA had not been established at that point, and that a cross-Government group had signed off the position, with VAT not considered a major issue.

A Treasury spokesperson said: "We are in discussion with the Department of Culture, Media and Sport and the ODA about these issues and we are confident we can find a way forward."