Taxpayer left to foot bill as deal to sell Olympic stadium collapses

The Government has called an abrupt halt to negotiations to install West Ham United as the owner of the Olympic Stadium after the 2012 Games. Instead the stadium will be kept in public ownership and leased to a number of tenants – probably including West Ham – in a decision that could require an extra £60m of public funding on top of the £500m spent on its construction.

Hugh Robertson, the minister for Sport and the Olympics, said that the judicial review sought by Tottenham Hotspur and Leyton Orient against the decision to award the stadium to West Ham had been further complicated by an anonymous appeal to the European Commission. That was "the straw that broke the camel's back". The review was due to be heard next week.

Mr Robertson said: "We had a process that was mired down in judicial wrangling. This could have gone on for months if not years. It is time to end this legal wrangling. This is the best way of stopping this becoming a white elephant. In order to stop this legal paralysis that is rapidly overtaking the whole process and to bring some certainty we decided overnight to suspend it."

The Olympic Park Legacy Company will now restart the bidding process with the aim of having tenants secured by January. That would allow them to meet the March deadline to have a planning application in place in order to have the stadium ready for its new use in 2014 as desired. London is bidding to host the 2017 world athletic championships and has given assurances to the IAAF, the sports' governing body, over the future of the stadium. That decision comes next month.

West Ham are almost certain to still move into the stadium – and could be allowed to buy it in the long term. They are likely to have to pay rent of £2m towards a predicted annual running cost of £5m. It is a deal that will appeal to the club. It is similar to the one Manchester City agreed with the city council in 2003 to take over the stadium built for the Commonwealth Games.

The remainder of the Stratford running costs will be met by hosting concerts, athletics and other sporting events, with the Government determined it will not prove a long-term drain on the taxpayer. But it will have to find extra funds to convert the stadium for post-Games use. It will still be scaled down to a 60,000 seats from its 80,000 Games capacity, a cost that was put at £95m under the original deal.

That was made up of £35m in the original Olympic budget plus £20m from West Ham and £40m from the local authority, Newham Council, which was West Ham's partner. Newham may still make some financial input to the reconfiguration of the stadium but it may also need public funding.

Q&A

Q. Why has the whole process had to begin again?

A. The threat of legal action by Tottenham and Leyton Orient – claiming the £40m put up by Newham Council to support West Ham's bid constituted state aid – threatened to drag on for months, leaving the stadium with an unsure future. There were concerns it could become the dreaded white elephant.

Q. So what is going to happen now? Are Spurs back in the running?

A. No. West Ham remain almost certain to be playing in a 60,000-seat stadium come 2014. But they will be just one of several tenants – "winter tenants" – and have to pay an annual £2m rent. UK Athletics, Essex county cricket club, and concert providers could be others.

Q. Why has it become such a mess? And who is going to pay for it all?

A. There is money in the Olympic budget but that will not be enough to convert the stadium. It could cost the taxpayer an extra £60m while annual running costs of some £5m could see a further hit if suitable tenants aren't found. The entire process is suffering from muddled thinking at the outset.