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Borrowing target in doubt as 4G auction falls short

By Nick Mann | 20 February 2013

The auction of the 4G mobile spectrum raised a third less than forecast in last year’s Autumn Statement, putting the government at risk of missing its borrowing targets, it was revealed today.

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Photo: Shutterstock

In December, Chancellor George Osborne said the auction was expected to raise £3.5bn, but the five successful bidders named by Ofcom today are together paying £2.34bn for a share of the spectrum, which will provide superfast mobile broadband services.

Rachel Reeves, shadow chief secretary to the Treasury, claimed the shortfall between the amount of money the Treasury expected to raise from the auction and the final amount was ‘another blow’ to Chancellor George Osborne’s ‘failing economic plan’.

She added that including the Office for Budget Responsibility’s forecast of the value of the sale in the 2012/13 borrowing figures used in December’s Autumn Statement was ‘foolish and short-termist’. In December, the Treasury noted the OBR had highlighted a ‘number of uncertainties’ relating to this figure, including bidders’ views on future demand for mobile products and the costs of meeting this demand.

Treasury sources told Public Finance that the £3.5bn figure had been ‘certified by the independent OBR and based on external expert independent analysis based on similar auctions’.

They added: ‘The final auction revenue will be accounted for at Budget in the usual way.’ 

The source also said that the 4G auction was not just about raising revenue for the Exchequer but about providing the UK with fast and reliable access to the the mobile broadband network, technology which had been shown to boost economic growth.

'That's why Ofcom structured the auction in the way that it did.'

Ofcom chief executive Ed Richards claimed the auction results were ‘a positive outcome for competition in the UK, which will lead to faster and more widespread mobile broadband, and substantial benefits for consumers and businesses across the country. We are confident that the UK will be among the most competitive markets in the world for 4G services.’

The regulator expects almost the whole UK population to be able to receive 4G mobile services by the end of 2017 at the latest and Culture Secretary Maria Miller claimed the auction would provide a ‘significant economic boost for the UK’.

She added: ‘Spectrum use is worth more than £50bn to the UK economy and 4G mobile broadband is a key part of our digital growth strategy so I am delighted the auction has been completed,’ she said.

The five successful bidders are: Everything Everywhere; Hutchison 3G UK; Niche Spectrum Ventures (a subsidiary of BT Group plc); Telefónica UK; and Vodafone. The two unsuccessful firms are: MLL Telecom and HKT (UK).

The next borrowing forecasts will be issued by the OBR alongside the Budget on March 20.

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