LONDON, Jan 24 A hard-hitting report by British members of parliament has raised fears ov

LONDON, Jan 24 (Reuters) A hard-hitting report by British members of parliament has raised fears over spiralling costs for the London 2012 Olympics.

The 48-page document, produced by a culture, media and sport cross-party select committee, praised what it called ''awe inspiring'' work at the site of the Olympic Park in east London, but criticised the handling of the budget, saying the figures were already ''seriously outdated''.

The report highlighted the sharply rising costs of the Olympic Park, the Treasury's liberal contingency plan and also questioned the widely held belief that winning the bid for the 2012 Games would have a beneficial effect on grassroots sport.

''The vast majority still look forward to a successful Games but doubts have already emerged, both about the cost of staging the Games and about whether a lasting benefit can be achieved,'' the report said.

''We are very disappointed that the cost estimates have been found to be faulty so early in the process.'' The euphoria of winning the right to host the Games was replaced by high-profile resignations and rows over budgets in the latter part of last year, culminating in Olympic Minister Tessa Jowell admitting that the budget for building the infrastructure had risen by 900 million pounds ($1.79 billion) to 3.3 billion pounds.

CONTINGENCY FUND The report called for Chancellor Gordon Brown to resolve a VAT bill issue as soon as possible after it emerged last year that it could add 250 million pounds to the budget.

''We are surprised that the Treasury did not establish the position (on VAT) from the start,'' the report read. ''The Chancellor now needs to provide an explanation of how this arose, particularly given that VAT did not have to be paid on the costs of the Athens Games.'' With regard to the ''contingency fund'' for the Olympic project, the report said the Treasury's proposals of up to 60 percent could amount to an ''open cheque''.

London mayor Ken Livingstone said last year that the maximum contingency fund should be 20 percent while the Olympic Delivery Authority favoured 30 percent.

''CASH FOUNTAIN'' Security costs also came under the microscope in light of the July 2005 bombings on London's transport network and the committee called on Jowell to publish a revised security budget ''as soon as it was agreed''.

While accepting that costs would rise, the report said that the London council tax should not be viewed as a ''cash fountain'' and called on the Treasury to contribute more.

The Department for Culture Media and Sport said it welcomed the report and would address the major points raised.

''Tessa Jowell is absolutely committed to transparency on the budget for 2012,'' a DCMS statement said.

''That is why she gave the Committee as much information as possible when she met them in November and why she undertook to report back to MPs when outstanding budget issues are resolved.

''This is the biggest public sector building project in Europe and, as you would expect, we are applying rigorous financial controls to ensure that every pound we spend is well-spent.

''Some costs have risen but that is principally because of the importance of ensuring a long-term legacy from 2012.'' EUTERS SAM BS1231