The 2012 London Olympics could face an additional 1-billion-pound (US$1.89 billion; euro1.49 billion) bill because organizers didn't include a tax on venue construction in the original budget.

London officials didn't include Value Added Tax (VAT) when compiling the 2.38-billion-pound (US$4.51 billion; euro3.55 billion) budget submitted to the International Olympic Committee as part of their bid in November 2004.

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Prime Minister Tony Blair said the Olympic costs would bound to fluctuate.

"My understanding is that there are cost implications both up and down and that's what you would expect with a project like this," Blair said at a news conference. "I don't doubt before the project is through there will be a series of ups and downs on the costs and every single aspect of it."

The Financial Times said the Olympic Delivery Authority (ODA), the body responsible for building the venues and infrastructure for the games, and Jowell's department had asked for the tax to be waived.

Their reasoning was that because the games are backed and partly funded by the British government, the VAT amounts to an internal transaction. But Treasury officials said that could break European Union rules on state aid.

VAT is a tax on consumer expenditure and is collected on business transactions, imports and acquisitions. It can be as high as 17.5 percent.

Jowell told the House of Commons that the bid file didn't include VAT because the government was advised it was not an issue.

She said she began a review of Olympics costs when London beat Paris, New York, Moscow and Madrid in July 2005 in the vote to stage the games.

"The funding needs of the games, including VAT, (and) the need for security, are a matter of continuing discussion within government," she said.

Jowell said the International Olympic Committee had expressed "utter satisfaction" with London's preparations for the games.

Last week, Jack Lemley,the American engineer who resigned as chairman of the ODA less than a year into the job,said he quit because construction projects seemed likely to come in late and cost more than expected.

The Sunday Times said Lemley had also warned about delays in checking for unexploded World War II bombs that could be buried on the 202-hectare (500-acre) Olympic Park site in Stratford in the London's East End.