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
The main reason for what? The way to cut the deficit is a mixture of tax rises, spending cuts and growth. Of course, too many tax rises and spending cuts will stop the economy growing, which has happened since 2010.
LB
What spending cuts? Not on planet Earth.
In which year has government spending gone down? Ie. Cuts.
Tax rises? Yep, in spades. So people have stop spending and investing. They haven’t the cash. Combined with increases in the basics.
However, since when will growth do it?
Overspend of 30%. How much growth at 1% when inflation is going up faster, and spending is increasing above in inflation?
Don’t forget to factor in the debt payments, all of them.
Deficit 150 bn. Now add on another 180 bn increase in the off the book debts.
I’m sorry but you are completely deluded. You’ve swallowed the politicians bait hook line and sinker.
1. Growth will not solve it.
2. There are no cuts in spending
3. Taxes have massively increased.
4. The debts are far more than borrowing by many times over.
Put the numbers to it. It’s basic simple maths. If you can’t do it, ask.
LB
So how does growth work to solve the governments deficit without taking more money from the taxpayers?
robertcp
Growth reduces the need for need for tax rises.
LB
Nice try.
Lets see. 150 bn deficit. Someone has to pay that.
If you have growth, that doesn’t get any more money into the government coffers. So what you really mean is taking more money from tax payers.
When ever you hear someone say, growth fixes the deficit, they really mean growth in taxes.
So lets now be a little kinder. Ah, but we won’t tax existing payers more (unlike the condems 35% plus increases), but if we get the unemployed back to work we pay less benefits (cuts in spending) plus we get some tax. So how does this pan out.
12K a year in benefits, say 3K for a better job than min wage. 15K each, assuming we spend no money doing so. Get a million back to work and you have saved 15 bn.
Who pays the other 135bn plus when spending is going up.
So you’re left with the other ways.
1. Spending cuts.
2. Defaults.
I suspect you would complain about those two.
That leaves printing or QE.
That causes inflation, so it doesn’t default on the inflation linked debts such as inflation linked gilts, or the pensions, or nuclear decommissioning, or PFI, …
It just leaves about 800 bn of Gilts, and the government owns 375 bn of those from QE. Can you default on yourself? 🙂