I’m grumpy about the Olympics. I have always been skeptical about the so-called benefits of hosting the expensive games and now that I haven’t got any tickets I’m doubly angry.
I estimate I’ve contributed over £500 in personal taxation to fund London 2012. That’s based on the 30 million UK taxpayers contributing £6 billion and the 3 million London households chipping in another £1.1 billion through their council tax.
Figures on the true cost of preparing, running and ensuring a legacy for the Olympic games are hard to pin down. They appear to be rising but my estimation of the total cost (less VAT because the Government gets this back) is around £10.5 billion.
In 2005, PriceWaterhouseCoopers estimated the total benefits of the games to be £11.6 billion which makes a cost-benefit ratio of 1:1.1, which isn’t great value for money. Moreover, that £11.6 billion of “benefit” included a staggering £3.2 billion of intangible benefits such as the “feel good factor” of hosting the games and the “sense of belonging” it would generate.
Setting aside the issue of whether the benefits outweigh the costs, I have three major grumbles with this significant public investment.
Firstly, London 2012 was sold as the regeneration games. A key aim is to have 120,000 more residents from the host boroughs in work by 2015. The Mayor is already celebrating the job creation success of the games, but does this stack up? There are apparently 4,000 people working on site, but these aren’t 4,000 new jobs. Only 4% of the workforce were previously unemployed and only 20% are from the 5 host boroughs – that’s 32 people. It’s unclear to me whether the games will ever achieve these regeneration aims or whether these couldn’t have been achieved through other programmes at significantly lower cost.
Secondly, who will really benefit? Research shows that big infrastructure investments such as new stadia tend to drive up land values. Unless wages increase (which they shouldn’t because the marginal productivity of labour shouldn’t have increased) then there will be two effects: (i) land/property owners will be better off (ii) renters will be worse off. The poor tend to be disproportionately renters and the rich…well you know where I’m going with this.
Finally, we economists are obsessed by opportunity costs – what we could have done with that £10.5 billion. We could have built 2,100 new primary schools or paid for about 500,000 nurses. Whatever benefit we have foregone by not spending that £10.5 billion on the Olympics rather than on the next best alternative is the opportunity cost of the games. This is the real cost of the games and I bet it dwarfs the benefits.
I guess this post smacks of stable doors and horses, which only adds to my frustration of not getting any tickets. However, there is a serious point here. If Boris Johnson, the Greater London Authority, the Olympic Games Legacy Company, whatever replaces the London Development Agency, and the five London boroughs “hosting” the Olympic games don’t want to squander this opportunity, they must stop thinking about bold visions and get down to setting targets, agreeing deliverables and actually putting something in place.
As a recent Parliamentary briefing paper concluded: “[…] four years after the bid was won, it is still unclear exactly what the government and other organisers expect to be achieved in regeneration terms. This is because few concrete targets relating to how the Games are expected to affect east Londoners, or indeed the country as a whole, have been put in place.”