A short term consequence of George Osborne’s failure to secure the expected money from the sale of 4G mobile spectrum – the sale raised £2.34 billion rather than the predicted £3.5 billion – will probably be greater government borrowing.
The treasury is now facing a £1.2 billion shortfall as a consequence of failing to secure the expected amount.
The prediction that the 4G sale would raise £3.5 billion was included in Osborne’s last Autumn statement to show that borrowing would not need to rise this financial year.
The fact that profit on the sale fell short by almost a third implies borrowing will now rise to make up for that shortfall.
Earlier this month, The Institute of Fiscal Studies (IFS) said the coalition had borrowed £64billion more than it had originally predicted in 2010. It also warned that whoever was in power after the 2015 election would need to find around £50billion to sustain public finances.
In this context, the extra billion that the chancellor will now need to find is relatively small fry.
It adds, however, to the growing sense that finances are spiraling dangerously out of control on Osborne’s watch.
Politically this is good for opposition parties, but it is worth remembering that within the coalition Osborne is under more pressure from the right than from the left.
As Left Foot Forward reported last week, the failure of austerity to bring with it a return to prosperity has had the perverse effect of emboldening the tory right, who are now putting pressure on the chancellor to make further swingeing cuts.
When the latest borrowing figures come out tomorrow it’s worth keeping an eye out for more short-termist, 4G-like attempts to distract from the trend towards increased borrowing.
Also keep an eye on Osborne’s critics on the tory right, who are salivating at the prospect of further cuts and are starting to get a hearing in the Conservative Party, ironically, due to the failure of a version of their own brand of economics.