London will host the Olympics and Paralympics in 2012

MPs were told the previous budget of �1.5bn was based on 2004 prices and did not include inflation up to 2012.

Liberal Democrat Treasury spokesman Vince Cable said it showed "total chaos" at the heart of the project.

But the London Organising Committee said all candidate cities had been asked to submit bids using 2004 prices and it had always expected to pay �2bn.

'Complete muddle'

The Westminster Hall debate was called by Mr Cable, MP for Twickenham in south-west London, after concern about the "potentially open-ended nature" of the council tax precept levied to pay for the Games.

He said the figures showed the government was in a "complete muddle" over the costings of the games.

But the London Organising Committee said it had always known the �1.5bn figure would go up once inflation was taken into account.

Communications director Jackie Brock-Doyle added: "We budgeted �2bn for the staging costs, but the International Olympic Committee asked all candidates to put figures in the year they bid."

It is total nonsense and completely unfounded to suggest that there is 'total chaos' at the heart of the Olympic project Government spokesman

The committee added that the money used to stage the games would be raised privately through ticket sales, broadcasting and marketing rights.

It would not affect the council tax levy on Londoners, which is going towards the separate �2.375bn budget to build infrastructure and facilities.

Sports Minister Richard Caborn said the government was reviewing all the estimated costs and would report back to MPs when this was completed.

They had learned the lessons of other large-scale projects which went over deadline and over budget, he said, and the precept on the London council tax payer would be affordable.

Shadow Olympic minister Hugh Robertson said it was extraordinary the real cost calculation had not been made in the first place.

But a Culture, Media and Sport Department spokesman said later: "It is total nonsense and completely unfounded to suggest that there is 'total chaos' at the heart of the Olympic project."