Culture secretary Tessa Jowell and London mayor Ken Livingstone met last night to hammer out a deal over underwriting a London Olympic bid.

The pair agreed to split the costs of hosting the games in 2012, easing the government's major anxiety over whether to back a bid or not.

The FT reports that of the £2.6 billion costs, £1.5 billion would be met by a combination of central government and lottery funds and the £1.1 billion remainder split between the London Development Agency and London council tax payers through Livingstone's Greater London Authority.

After yesterday's qualified support for the project from the Commons culture, media and sport committee, the papers believe the government is edging closer to supporting a bid.

Livingstone said he was "delighted that we have been able to agree a robust financial package that will enable an Olympic bid to be made".