4G will boost broadband speeds - but not Osborne

The autumn statement that never was: 4G sell-off leaves £1bn black hole in Osborne’s finances

The autumn statement that never was: 4G sell-off leaves £1bn black hole in Osborne’s finances

George Osborne's autumn statement was in danger of falling apart today, after the sell-off of the 4G mobile phone licenses raised just £2.3 billion – significantly less than the £3.5 billion predicted by the government.

The £1 billion loss invalidates Osborne's triumphant calculations in the autumn statement, in which he used the projected £3.5 billion to assure voters borrowing was falling.

"This shows how foolish and short-termist the chancellor was to bank this cash in the autumn statement to make his borrowing figures look less bad," Rachel Reeves, shadow chief secretary to the Treasury, said.

"He couldn't bring himself to admit that borrowing was up so far this year but his trickery has now badly backfired."

Osborne surprised critics during the autumn statement by announcing positive debt and deficit figures on the basis of the 4G auction this year, £3.1 billion clawback from Swiss tax-dodging schemes next year and £2.4 billion from ministerial budgets the year after that.

Coming just after a disastrous Budget the autumn statement was originally seen to restore Osborne's reputation, although the news of the sell-off threatens to once again call the chancellor's abilities into question.

"The figure for the 4G auction was optimistic, just like most of the numbers in George Osborne's strategy," Tory MP John Redwood said.

"This is a dent, but there are far bigger dents in the public finances."

The cheap sell-off also raises questions about the competence of Robert Chote, chairman of the Office of Budget Responsibility (OBR), which arrived at the projected income.

It is the latest of a series of over-optimistic forecasts from the department, which was set up by Osborne to provide independent assessment of national finances.

Ofcom chief executive Ed Richards defended the sell-off this morning, saying it was aimed at helping consumers rather than earning cash for the government.

"Nothing went wrong, because we never had an objective of maximising or raising revenue," he told BBC Radio 5 Live.

"It wasn't the objective we were set by the government, and it wasn't our aim in the auction.

"We were aiming to secure a different set of goals. And those goals were a competitive market, widespread availability, and the efficient allocation of this spectrum. I think the auction has successfully delivered those objectives."

Everything Everywhere (EE) expanded its control of 4G but mobile operators Vodaphone, O2 and 3 all won bids, as did fixed-line operator BT.

Vodaphone paid £790.8 million for five block of airwaves. EE paid £588.9 million, O2 paid £550 million for two tranches, 3 paid £225 million and BT paid £186.5 million, which will go towards its broadband service rather than a mobile network.

There was better news for Osborne this morning, after official figures showed employment was up 500,000 from the last three months of 2011 to the last three months of 2012.

Official figures showed that while the number of people employed in the UK public sector fell by 324,000, private sector employment was up by 823,000.