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4G sale falls £1.2bn short of forecast

UK Government ministers have talked up the sale of the 4G mobile phone licences even though, by raising £1.2 billion less than expected, it blew a hole in Chancellor George Osborne's attempt to get borrowing down.

Ofcom, the telecoms watchdog, raised £2.3bn from selling mobile licences to mobile phone giants Vodafone, EE, Hutchison 3G and O2 parent Telefonica, along with a subsidiary of BT, but this is well short of the UK Government's reckoning, based on an estimate from the Office for Budget Responsibility (OBR), that it would provide a £3.5bn boost to the Exchequer.

A spokesman for the OBR explained that its estimate was reasonable and based on similar sales outwith the UK. In December, mobile operators in Holland paid £3.1bn for the Dutch 4G spectrum.

He said: "At the time we highlighted this estimate as an area of particular uncertainty in the December forecast. We will include the final proceeds announced today in our Budget forecast in March."

Rachel Reeves, for Labour, seized on the figures, saying: "This is yet another blow to George Osborne's failing economic plan. It 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. He couldn't bring himself to admit that borrowing was up so far this year but his trickery has now badly backfired."

However, Nick Clegg insisted ministers were not to blame for the over-estimate, saying: "The figure that George Osborne talked about wasn't plucked out of thin air; this was actually verified by the independent OBR.

"Of course, it was a prediction, by definition, about an auction that hadn't yet been completed, but it wasn't one cooked up by politicians in Whitehall. The OBR said that was a reasonable estimate."

The Deputy Prime Minister also insisted the 4G auction was not just about money, adding: "The sole purpose of the exercise was not simply raising revenue, it was to make sure in the long run we have a competitive economy with access to these fantastic, high-speed, 4G services across the country."

Iain Duncan Smith, the Work and Pensions Secretary, claimed the Government had never banked on getting the full £3.5bn, noting: "Let's be honest, it was a prediction by independent experts but the reality is until the receipts come in, you don't count that money."

The £2.3bn figure is way down on the £22.5bn raised from the 3G licence during a bidding frenzy by mobile phone operators at the height of the dotcom boom.

4G will allow uninterrupted access to the web on the go, high- definition movies to be downloaded in minutes and TV to be streamed without buffering.

Ed Richard, Ofcom's chief executive, stressed that the regulator was not instructed to raise as much money as possible.

He said: "Nothing went wrong because we never had an objective of maximising or raising revenue. 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. The auction has successfully delivered those objectives."

Perils of predictions

ECONOMIC and financial forecasting is notoriously difficult.

The Office for Budget Responsibility has in the past been accused of getting its predictions "horribly wrong" but this is mainly put down to the uncertainties of the ever deepening economic crisis at home and abroad. Treasury officials point out nobody's growth forecasts have been right and have had to be constantly revised.

In June 2010, the newlycreated OBR forecast UK growth of 1.3%, 2.6% and 2.8% in 2010, 2011 and 2012, respectively but the results were 1.8%, 0.9% and -0.1%.

Robert Chote, the OBR chief, once said: "It would be lovely if we made perfect forecasts but they are our best judgement, not infected by politically-motivated wishful thinking."

Chancellor George Osborne admitted the creation of the OBR, an independent forecaster, was a rod for his own back; particularly, it would seem, when it gets its forecasts wrong.

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