THE projected cost of the 2012 Olympics has risen by £5 million, according to the body responsible for delivering the Games.

But a report by the Olympic Delivery Authority (ODA) insists the project remains on time and on budget.

The rise in costs has been blamed on transport and infrastructure for the Olympic Village and Stratford City, which is a privately financed development.

The Government pledged not to use the contingency fund and insisted the budget was “stable”.

But Sport and Olympics Minister Hugh Robertson warned of “further challenges”.

He told the BBC: "My suspicion is that this will now become less a contingency for construction and more a contingency fund for the wider project."

ODA chair John Armitt said: "The ODA has worked hard to make considerable savings since the start of the project with £600 million saved to date to keep us on track."