Britain faces some tough choices over whether to launch an Olympic bid, the culture secretary has warned.

In a day dominated by the issue, Tessa Jowell and the prime minister were keen to send out the neutral message.

Although Britain has the ability to stage the event, it may not have the cash to mount the gamble of a bid, ministers claimed.

"This is a difficult decision and the arguments are finely balanced. The government is genuinely open-minded," Jowell told MPs.

The minister sought to talk down the chances of Britain applying to host the 2012 Olympics - warning any cash would come from a public purse already under the strain of rebuilding public services.

Jowell warned MPs that the total cost for hosting the event in East London could rise to around £4.5 billion - which could not be funded by sport alone.

"It's a very tough choice. This money would be coming from the same pot as schools and hospitals and they have to have a higher priority," she said.

"There is an obvious case to be made for sport but this is potentially a huge investment with a heavy call on public money."

The argument would be won if the event could go ahead without "distorting" other priorities and left a strong legacy for London - facilities that would not become white elephants.

Barcelona's Olympic bid had been used as a way of revitalising the city and was held up by Jowell as an example of the benefits of hosting the event.

Striking a positive note, the culture secretary said tourism would be boosted over four years by around £400 million and the image of both London and the UK would be enhanced.

The Commonwealth Games last year had shown that Britain had the expertise to stage an international event and London was "a force to be reckoned with".

"There is absolutely no doubt Britain can stage an Olympics in 2012. Some of out detractors will point out the failure of Pickets Lock to argue that we cannot deliver but the Manchester games show otherwise. A high-quality games is deliverable," Jowell told MPs.

Ahead of discussions between MPs and members of the International Olympic Committee, Jowell said ministers had to be "absolutely confident" the costs would not come out of public funds.

Her comments echoed the views of chancellor Gordon Brown, who is widely seen as the man who will make the decision.

Brown said he would "love'' to see the games in Britain but warned: "We must get it right in terms of costs. I do not think people would want the health service to lose money or education to lose money.''

Downing Street said ministers would be reaching their decision by the end of January on the basis of affordability, the legacy the games would leave behind, whether London could deliver and if Britain could realistically win the bid.

"Any country would wish to host the Olympics but difficult decisions have to be made along the way," said the official spokesman.

The government's latest comments brought criticism from opponents.

Nick Harvey, Liberal Democrat culture spokesman, urged ministers to be bold.

"Fortune favours the brave, and if the government continues with their current apprehension, then of course the bid is doomed," he said.

"The £2 billion price tag for tax payer rightly concerns the minister, but this sum would be spread over nine years."

A London bid is backed by all the opposition parties and London's mayor - but many cabinet ministers are still smarting from the dome and Wembley stadium debacles.

Despite the coolness from ministers, the British Olympic Association remains optimistic.

"Our resolve and our bid is getting stronger," said a spokesman.

"The government are quite rightly taking their time over this but we hope and expect the cabinet to make the correct decision."

Speaking on Monday, the prime minister took a "realistic" line on the games.

"It would be a very odd person who said if we could get the Olympics in London should you take it? Of course," he said.

"The question is, will we be able to do that? Is it likely that we will succeed?"

"That is the consideration that we are giving at the moment because you have got to see of course whether it is affordable but also whether you have got a good chance of winning."

Tony Blair's caution may reflect an official report - as yet unpublished - which puts London behind world class rivals such as Paris or New York.

Ministers are unlikely to sanction huge public subsidies for a project that may fail.

On Monday the London assembly's culture and sports committee warned that the capital's transport system will need improvement if a bid to host the Olympics is to succeed.

The GLA members outlined the extent of transport improvements needed to win a potential bid.

Feasibility studies have also estimated that up to 11,000 athletes, 10,000 support staff and 20,000 journalists would attend the event.

The improvements required to cope with the influx could transform the city's ailing transport network, said the committee.

Meg Hillier, chairman of committee, said that transport would be the "key issue" if London is to successfully host the Olympic games in 2012.

"Major projects need to be started by the government as soon as possible if they are going to be completed on time," she warned.