The £1 billion Olympic Village has been effectively nationalised after private funding failed to materialise.

Olympics Minister Tessa Jowell said private funding had been rejected as it was "not a good deal" for the taxpayer.

£261m will be raided from a contingency fund and £63m from "savings" elsewhere in the project.

Another £268m will also be invested from a deal with Triathlon Homes to sell affordable flats at the village.

The £1bn village, which includes 2,800 flats, was initially a privately-funded project but was switched to a public-private financed initiative when potential investors dried up.

"Money will be paid back"

The government said the money would be paid back after the flats were sold.

Ms Jowell said:

"By funding the entire project, the village will become publicly-owned and the public purse will receive substantial returns from sales."

She added the Olympic Delivery Authority may pursue private deals when the site is nearly finished.

"Concern" - "Site must be sold"

Shadow Olympics minister Hugh Robertson said the decision was "a cause for concern". Adding:

"The lack of private-sector funding for the athletes' village is a direct reflection of the severity of the current economic downturn.

As soon as markets improve, it must be sold to the private sector and today's outlay recouped for the taxpayer."

The Lend Lease deal

A plan from primary 2012 contractor Lend Lease and its banking consortium was rejected after ministers decided it was not in the best interests of the tax payer.

The company had been prepared to invest up to £150m in equity and £225m in bank debts to finance the construction.

The Australian constructors, who were building the Village, did not get £40m in from the private sector and plans to raise cash by selling part of the project have hit the buffers in the current economic downturn.

The ODA admitted the downturn threatened the projects, but pledged the Games would not exceed its budget - a budget that tripled from £3.4bn to £9.3bn.