Ministers' shock at '£5bn' 2012 Olympics price tag

Britain is facing fresh embarrassment over its reputation for mishandling major sporting projects after ministers discovered it could cost the taxpayer between £4bn and £5bn to stage the Olympic Games in 2012.

Ministers were already looking as red-faced as relay runners who drop the baton after embarrassments over Wembley, Picketts Lock and the Millennium Dome made the nation a joke in sporting circles abroad.

However, it has emerged that ministers have started a cost-benefit analysis of staging the Olympic Games in 2012 and have been appalled at the expected cost.

Britain has to declare its interest in bidding for the Olympics next year to stand any chance of winning the contest in 2005. A failure to do so would look like a national loss of nerve, yet ministers are doubtful that the country can afford to foot a bill as high as £5bn.

A solution to the Wembley farce could come as a limited respite. The IoS understands The Football Association is about to seek fresh bids to plan, develop and build a national stadium at Wembley and at a site adjoining the NEC in Birmingham.

It will therefore be left to the FA to make the final choice of whether to redevelop the historic Wembley site or to move the national stadium to the Midlands. Government ministers have made it clear that they can expect no more public funding for the scheme.

"We have injected competition into it," said a senior sporting source. "What will happen in the next few weeks is that we will go out and ask for properly-financed bids for the national stadium either at Wembley or in Birmingham."

By inviting fully worked-out schemes, ministers are hoping to avoid any embarrassing repetition of the spiralling costs that led to the original ambitious plans for the redevelopment of Wembley being abandoned.

The nation has faced a humiliating delay while ministers, the FA and Sport England, have wrestled with the problems. Soccer players have led the case for having no national stadium, leaving England to play all its home matches at different Premier League stadiums right across the country.

Ministers were attracted to the idea, because of the avoidance of any further cost, but have been persuaded that the home of football needs a national stadium. Anything less would be the biggest embarrassment of all when ministers go abroad.

It leaves questions still to be answered over the repayment by Sport England of £120m in lottery funding for the Wembley development. A highly critical report last week by Gerald Kaufman's culture committee castigated Chris Smith, the former Culture Secretary, for apparently doing a private deal with Ken Bates, then head of the Wembley project, to pay back only £20m of the funding.