The chancellor has played down fears over a reported £250m hole in the London Olympic budget because of an unforeseen VAT bill.

Gordon Brown said on Tuesday that the government is "committed to making the 2012 Olympics work" and would find the extra cash.

He was speaking after it emerged that VAT could not be waived on the £2.4bn building costs for the Games due to longstanding EU rules.

Organisers had not taken the extra cost into account when submitting their original bid to host the event, presuming that the Treasury would waive the bill due to the government's support for the Games.

"When we did the original application, there was one form of company organisation that might not have required VAT," Brown told BBC Radio 4's Today programme.

"Now that we have looked at the thing in detail, there may be another form of company organisation for the Olympic deal."

However he stressed that there was "not an issue about the overall bill" for taxpayers because it was either "money transferred from the Exchequer or to the Exchequer".

"It is our job as a government, having made a commitment to have the Olympics in London, to make sure that the buildings are done in time and to do it to the best of our ability," the chancellor said.

The Olympics would "also have a legacy that will regenerate that part of London and be of benefit to the whole United Kingdom", he argued.

On Monday the prime minister indicated that London council taxpayers would not be asked to fund the shortfall.

But the Conservatives accused the government of "frightening incompetence" on the issue and warned that more lottery money may be used to make up the difference.

In the Commons, shadow sports spokesman Hugh Robertson clashed with culture secretary Tessa Jowell on the subject, accusing her of breaking a "personal assurance that VAT would not be levied".