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
I cannot be bothered to debate with someone who seriously thinks that growth does not get more money into the government coffers.
LB
Follow the chain.
How does any money get into the coffers?
Tax. It’s all tax unless you print funny money.
So by Growth you really mean growth in tax revenues. More money from people
robertcp
Yes, growth means that the government collects more tax and spends less on welfare.
LB
So now put some numbers too it.
For those on welfare and not working, how much are they being paid in welfare?
What sort of jobs are they going to get and how much tax will they pay as a consequence?
How many can you get back into work and what’s it going to cost?
Get a million back into work for free (can you do that?) and you get 15 bn a year. That leaves another 135 bn to come from other people’s pockets.
Take another 135 bn from people, another 25% on taxes. Hmm, do you think you’re going to get much growth from that tax hike? You will end up with more people on welfare because their after tax earnings are now so low.
robertcp
I disagree. You are entitled to your opinion but I will not be responding to any more posts.