£1 billion shortfall in 4G auction gives Osborne a new headache

Chancellor was expecting a billion more to help fund growth when he gave his Autumn Statement

Column LAST UPDATED AT 09:51 ON Wed 20 Feb 2013

A BILLION-POUND HOLE has been punched in the Chancellor's plans for next month's Budget by the failure to raise more than £2.34 billion from the auction of the 4G mobile waveband, the results of which were announced by Ofcom this morning.

Osborne pencilled in between £3bn and £4bn in his Autumn Statement only three months ago – significantly less than the £22bn raised by the 3G auction 12 years ago, but still very handy for a Chancellor strapped for cash in the middle of a recession.

As the BBC Daily Politics presenter Andrew Neil tweeted this morning: "4G auction raises... a billion less than Chancellor anticipated. Another hole in deficit reduction?"

The Chancellor has already earmarked the money from 4G for capital spending on projects to boost growth by creating building jobs. These include further education colleges. "We are using the 4G money in part for new capital spending including FE Colleges," Osborne told MPs in December.
Ed Richards, chief executive of Ofcom, asked about the auction shortfall, said today: "We are in very different times but maximising revenue was not our objective. It was not the objective the government set us."

He refused to comment on Radio 4's Today programme about Osborne's wonky forecast, given in the Autumn Statement to show that national borrowing would not rise this financial year.

News of the 4G shortfall comes as Osborne and David Cameron continue to resisting call from their coalition partners, the Lib Dems, to raise more money by taxing the rich – specifically through with a 'mansion tax' on homes worth more than £2m. It could cost householders £25,000 a year in new taxes on top of their council tax, regardless of their ability to pay.

Cameron said yesterday during his trip to India that he would be 'very disappointed' if Nick Clegg and his Lib Dem backbenchers were to vote for a motion backing the mansion tax, which is being tabled by Labour for a vote next month in the Commons.

The loss of over £1bn will add to the pressures on Osborne. After last year's infamous 'omnishambles' Budget, which led to a series of embarrassing U-turns, he must get it right this time or Cameron will be under pressure to find a new chancellor. The £1.2bn shortfall won't help either man convince voters that Osborne has a grip on the nation's accounts. ·