"Significant uncertainties" over 2012 Olympics could drive up the cost of the London Games over £10 billion, the government's spending watchdog has warned.

The National Audit Office said the £9.3 billion budget announced by Tessa Jowell, the Olympics minister, in March was "sufficient to cover the estimated costs" as plans stood.

But in its report on the soaring bill for the Games, the NAO said ant project on that scale would involve "a high level of inherent risk".

Prices could rise in three "significant areas of uncertainty", the watchdog said. These are venue design, construction price inflation and private-sector funding of the Olympic Park.

Sir John Bourn, the Auditor General, said the process of setting the budget was "thorough".

However, he noted the cost had "increased greatly" from the original estimate of £3.4bn when London won the bid two years ago. It is now three times as high.

Sir John urged the Department of Culture, Media and Sport to use as little as possible of the £2.7 billion set aside for contingencies.

"The Olympic Games is now on a firmer financial footing thanks to the budget announced in March 2007.

"This should help all those involved in delivering the Games to move forward with greater confidence.

"However a budget is just that - a budget, not a target."

Ms Jowell promised her department was "determined to keep an iron grip on costs".

But the Conservative Olympics spokesman, Hugh Robertson, said: "Whilst it is encouraging that the NAO thinks that the revised budget - which it should be remembered is three times the original estimate - is sufficient, it is clear that they feel that the most likely cause of further cost overruns will be lax management."