The shortfall from the sale of 4g broadband capacity means chancellor George Osborne will be under increasing pressure to make greater cuts.
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.
31 Responses to “Osborne’s missing 4G billion increases pressure for cuts”
robertcp
Are you arguing for spending cuts of 150 billion? That would be a disaster!
LB
Compared to what? It’s a choice.
Either spending is got under control, or you and everyone else doesn’t get a state pension, and no welfare.
That’s what you’re advocating. You want your spending now, and bugger pensioners in the future. They can be destitute, after all, I’ve got my cash out.
That’s the problem with the left. Like any 3 year old in a sweet shop, they want their sweets now and bugger the consequences.
So why should people get no pensions because we can’t cut 5 a day coordinators off the payroll?
robertcp
I am not arguing with the need for spending to be brought under control but it should be done gradually. Trying to cut spending too quickly has resulted in a higher deficit this year than last year.
LB
The problem is that at the current rate, it never will be.
The debt is going up so fast, that no growth rate will bring it under control.
The overspend is 30% of taxation.
How many years of growth at 1-2% will be take to get that under control?
The answer is never, because inflation is higher.
The overspend ignores the increase in pensions debts. That’s running at 180 bn increase a year. On top of the 150 bn overspend.
Hence slowly ain’t going to cut it.
So its going to be cut Greek style.
LB
The main reason is screwing people for tax, whilst having above inflation increases in spending.