Osborne’s missing 4G billion increases pressure for 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.

gideonThe 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.

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  • HerbertProperSenior

    I’m hoping that John O’Farrell will be returned as M.P. in the forthcoming Eastleigh by election.

  • LB

    failure to secure the expected money from the sale of 4G mobile spectrum

    =====================

    It’s not a failure. It’s a win for the consumer, because it means lower prices for mobile usage.

  • LB

    he fact that profit on the sale fell short by almost a third implies borrowing will now rise to make up for that shortfall.

    =========

    Or the government gets its spending under control. 150 bn of Keynsian stimulus, and bugger all to show for it.

  • http://www.facebook.com/profile.php?id=620287541 Kevin Leonard

    The man is nothing but an incompetent ar$e who does not have a clue about finance other than what he is being told by his own financial advisers who pocket a percentage from hiding his personal fortune on some far away shore.
    He is heading towards the honour of being the most hated imbecile alongside many contenders in this coalition of ba$tard$.

    The pity of it is that come the next chance for the people to pretend to have a democratic choice in who runs this country it will still be “ALL LABOURS FAULT” according to the coalition and backed by the BBC and the compliant press a great number will follow like sheep and produce yet another stagnant Quasi dictatorship in Westminster with all following the whip system.

    WE NEED A REVOLUTION OF THE PLEBS rid ourselves of this controlling set of arrogant ba$tards on all sides.

  • robertcp

    More cuts will slow down the economy even more and lead to more borrowing. Has the Tory right learnt anything since 2010?

  • Newsbot9

    Yes, keep claiming pork-barrel spending is Keynsian. You can’t cut throats fast enough can you.

  • Newsbot9

    Yes. They don’t want the deficit to close, robertcp. It’s too useful.

  • http://twitter.com/FRANCISGERALDAL FRANCIS GERALD ALLEN

    And of course LB, you will guarantee that mobile phone companies will reduce prices/charges. You apologists for big business and the Torie’s forget that the mobile phone operators fought tooth and nail the attempts by Brussels to reduce crossborder charges for mobile phone calls, I believe it took years to get the reduction through the courts. So muchfor competition.

  • LB

    I’m a fan of neither.

    The advantage of the mobile business, is I can go elsewhere and switch. I can even stop using a mobile altogether. It’s my choice, and the mobile companies can lump it.

    So look at your arguments. It took years to get it through the courts. Who runs the courts? The state.

    Who didn’t implement the changes to charges quickly? Brussels, yet another branch of the state.

    However, for the state, I’m screwed. Irespective of the service not only do I have to pay for it, I have no choice.

    So when it comes to health care, I have to put up with the NHS, like most people. Even though the BMJ’s figures are that it kills 40,000 more than it should, each year.

    When it comes to pensions, people are really going to be screwed. Again, for most people they have no choice. They have to rely on the state. How much does the state owe them? In the UK, 5,300 bn, hidden off the books. Why’s it off the books? Less than a 50% chance of having to pay out. It’s going to go Greek, and that screws people to an unbelievable extent.

  • Newsbot9

    Yes yes, keep on bemoaning the lives saved, when you could kill them by not allowing treatment. And keep talking about how you’re not going to pay pensions. About how you, personally, are working to rip off British people, boasting about how you’re ripping us off.

  • LB

    More borrowing now, means bigger cuts later.

    The money has to be repaid with interest.

    Hasn’t Labour learned from the Tories that you can’t borrow your way out of a mess?

    e.g. We’ve had 150 bn a year of Keysnian borrow and spend. I don’t notice the promised growth.

    Spain borrowed and spent. High speed rail, solar, and housing. That’s they current prescription from the left for solving the mess. So why is Spain in such a dire situation? They done what Labour advises.

    You need to explain why that policy will work here.

  • robertcp

    The fiscal stimulus did work in that it helped us to avoid total catastrophe in 2008-10. Darling planned to start cutting the deficit in 2011 and to halve it by 2015. The Con-Dems decided that was too slow, so they started cutting the deficit in 2010 with the aim of eliminating the deficit by 2015. This has stopped the economy growing since 2010 and it looks like the deficit will be higher this financial year than last. Of course, we will never know whether the Darling Plan would have worked but we do know that the Con-Dems will be lucky to halve the deficit by 2015.

    My view is that the deficit needs to be reduced at a rate that still allows the economy to grow. Trying to cut the deficit quicker is actually counter-productive.

  • LB

    The problem is that the stimulus should have produced growth according to Keynes. 150 bn of borrowing and spending is a massive stimulus. It hasn’t worked. Just has it hasn’t worked in Spain as just one example. Or Japan for another.

    That’s pretty strong evidence that the Keynsian stimulus concept in now is the wrong medicine. You just have to look at the underlying cause of the 2008 banking crisis. It was that people had borrowed and spent too much, and didn’t pay their debts.

    Now we have governments borrowing and spending to somehow cure a problem, caused by borrowing and spending too much. It’s voodoo.

    Growth won’t fix the problem either. If the government maintains spending at real levels, and the Condims have increased spending in real terms, that means they need to tax people more. Not particularly good for growth. So the usual argument is that its not existing tax payers, its getting people back into work, and then they will pay tax, and we don’t pay them benefits.

    So 150 bn is to somehow come from the unemployed. Hmm, even if we get a million back to work at 15K each in benefits not being paid, and taxation from them (about the level for a min wage job), that’s only 15 bn. Who is going to pay the other 150 bn plus interest?

    So the condims won’t halve the deficit. You’ll get the weasel word of structural or cyclical trotted out, and fiddling of the numbers. Labour won’t.

    So that means paying back the cash with interest. They can’t so they will just print it to write it off. That’s what Mervyn King has realised. QE will never be repaid, so print it. The problem is that QE went on Gilts. The money from Gilts was spent. No one was lending to the UK government. QE = Gilt Issuance since 2008 as near as damn it.

    So you’re left with massive cuts. The only plan, is it forced or is it planned.

  • robertcp

    I disagree for the reasons that I have already given.

  • LB

    You’ve not given any reasons. You’ve just waffled.

    Put some numbers to your argument, and you will see its baloney.

    The real problem is that we have raised taxes, and that’s killed off any growth.

    Growth itself cannot cure the government’s finances.

    It’s spending 150 bn more than it taxes. 700 bn of spending on taxes of 550 bn. A 30% overspend.

    How many years of 2% growth will it take to wipe that out? Remember that the spending has been going up above inflation.

    So its going to be default, all because the state sector wants it now .End result going forward, you won’t have it.

    That’s particularly shit for the people who really need the state to help them.

  • 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.

  • 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? :-)

  • 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.

  • LB

    Difficult isn’t it?

    When the numbers are there, in black and white, its hard to argue the growth is pixie dust and solves all problems.

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