The entire cost of the £1.1bn London 2012 Olympic Village is to be funded by taxpayers, after the government and the Olympic Delivery Authority (ODA) admitted that they had failed to secure private backing.

Ministers have now approved a further £324m, to be sourced from contingency funds, in order to help fund the scheme after a deal put forward by Lend Lease was rejected due to the increased risk to the public sector brought about by the recession. It now means that taxpayers have contributed a total of £650m to the Olympic Village project. Organisers hope to recoup all of the latest cash injection through the sale of flats after the 2012 Games.

The remaining balance of the £1.1bn scheme is expected to be met by Triathlon Homes, which has agreed a £268m deal in principle with the government and ODA to provide 1,400 affordable homes as part of the development. Olympics minister Tessa Jowell said: "A private sector deal was available, but because of the credit crunch it was not a good deal. By funding the entire project the village will become publicly owned and the public purse will receive substantial returns from sales.

"The ODA will make a fresh assessment of the market nearer to completion with a view to pursuing deals with other possible investors." Jowell also revealed that organisers still have nearly £1.3bn remaining from the £2bn contingency fund, while also claiming that a reduction in forecast costs means that the overall £9.3bn budget for the 2012 Games will not increase.

Image: ODA