4G spectrum failure hardly surprising, but what is Ofcom playing at?

Nik Darlington 9.58am

When George Osborne said the Treasury would raise several billion pounds from the upcoming 4G auction, I along with many others feared (or even expected) that wouldn’t be the case. Some technical and financial reasons for why, but largely an informed hunch.

So it has come to pass. ‘Only’ £2.34 billion has been raised by Ofcom, despite the OBR’s forecast of £3.5 billion.

A couple of observations about the reporting of all this: first, £2.34 billion is still a useful fillip not to be sniffed at; and second, this mini embarrassment has given journalists a perfect excuse to ignore the good employment figures also released today.

Yet a mini embarrassment it is. Perhaps Mr Osborne should not have brandished an outcome ahead of time, but auctioneers tend to set target prices with little impact on bidding behaviour other than to focus it around said target. It isn’t a patch on Gordon Brown selling our gold reserves having already announced to the world his intention to do so.

On the subject of auctioneers, however, something odd happened on BBC Breakfast earlier today. Ed Richards, Ofcom’s chief executive and unsuccessful candidate for BBC director-general (despite being the bookies’ favourite), was on talking about the auction. Mr Richards stated that Ofcom’s priority - as auctioneers - was straightforwardly to hold a fair and proper auction and “ensure that a valuable economic resource was brought into productive commercial use”. Ofcom’s priority - as auctioneers - was certainly not to maximise revenue.

Whether or not this was on instruction from the Government doesn’t matter. It is still odd. Tell auctioneers at Christie’s that the whole point is just to shift stuff and not to maximise revenues, you’ll be laughed out of the room. These are, as Mr Richards also said, “very different times” compared to the 3G spectrum auction, which raised £22 billion in 2000. But it doesn’t mean you shouldn’t at least have a go at it.

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Autumn Statement 2012: A lot of Balls and a bleak midwinter?

Nik Darlington 2.57pm

I was on BBC Radio Scotland earlier talking about the Autumn Statement and just before I was due on air with the Daily Record's political correspondent, the weather report told tales of snow drifts, icy condition and road closures - painting a generally bleak midwinter picture.

In isolation, that report could’ve been about the British economy. Those heady summer days of Olympian achievement and a return to growth seem ever-more distant. This is the backdrop to what the Chancellor had to say to Parliament today, and the inclement economic weather should never be forgotten.

Indeed, Mr Osborne is set to break his own fiscal rules. Yet Gordon Brown also did that, but in the boom years - a symptom of the budgetary misbehaviour that characterised the Treasury under the feckless oversight of Mr Brown and Ed Balls.

The former Prime Minister might have lost a stick insect, but his former lieutenant was not grieving. Cheeks puce and puffed out, he berated, bewailed, gloated and tore into the man who’s office he might have had if only Alistair Darling were a lesser man.

When Ed Balls is good, presentationally at least, he is very, very good. Yet George Osborne is rarely better than when sparring with his opposite number (one gets the impression they enjoy it). I’m as unconvinced about the ‘blame Labour for all the economy’s ills’ line as I was at the time of the 2011 Budget, however Mr Osborne continues to play the card strongly, persistently and - judging by the looks on the faces of Eds Miliband & Balls - effectively. How well it plays with the public is another matter.

Former Tory whip Michael Fabricant relayed to the Chancellor the instantaneous thumbs-up from the bond markets, stating “it is the markets that matter”. Apt, to the point and certainly good news - though what voters think cannot be taken lightly either. I know what someone as acutely political as Mr Osborne will be thinking about first thing he wakes up in the morning.

Conservative MPs will be pleased with the scrapping once again of a 3p rise in fuel duty. Harlow’s MP Rob Halfon has led backbenchers on a spirited and tireless campaign against the duty, though one has to question how much gas is left in that tank. Can fuel duty rises be fought forever?

The lower threshold for income tax continues its rise towards £10,000, as expected. The personal allowance shall be £9,440 come next April.

Also to be welcomed is the further cut in corporation tax to 21 per cent. Let us not forget that it was as high as 28 per cent when the Coalition took office. Businesses can invest a greater proportion of their profits into the likes of expansion and employment. This is very good news.

The hit on working-age benefits will not play well, of course. Shrieks of unfairness can already be heard around the tenured ranks of social policy think tanks, the opposition and the like. And indeed it doesn’t look good. However, there is also the moral argument that at a time when wages are struggling to keep up with inflation, if rising at all, should welfare handouts continue to outpace? It’s a tough call, but I think it is the right one. It shall save nearly £4 billion. We can slice and dice this, that and t’other bits of public expenditure but until welfare payments are properly addressed, that ruddy old deficit shan’t budge much.

Those are my two-pennies’ worth. Plenty of ink shall be spilt and trees felled elsewhere in pursuit of explaining today’s Autumn Statement. I shall just finish with a brief thought on shale gas. I’ve had my concerns in the past about fracking for shale gas. I’m still not convinced of the safety record but I’m open to being so; and if it is the energy panacea some claim it to be, then by all means it should be pursued. Though not at any environmental cost.

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The ghosts of Keynes and Brown are alive and well in Her Majesty’s Treasury

David Cowan 6.00am

The dust has settled on the Autumn Statement.
George Osborne has stuck to his original spending plans but abandoned his 2014-15 target for eliminating the structural budget deficit.
Instead there will be further 0.9 per cent cuts in real terms to current expenditure during 2015-16 and 2016-17. Over the seven year period public expenditure will fall by 16.2 per cent in real terms.
This means that during the Conservatives will be going to the country in 2015 with the pledge to cut an extra £116 billion over two years.

These are dangerous and unpredictable times. It is especially worrying when the OBR’s gloomy forecasts are based on the optimistic assumption that the Eurozone will survive its sovereign debt crisis.
The two year extension of the deficit reduction plan is also based on the complacent assumption that the Conservatives will still be in power in 2015. George Osborne should have refuted this complacent attitude and repositioned his fiscal policy in a credible manner, as by the 2012 Budget we could be living in a very different world without the Euro and the onset of another global recession, if not a depression.
 
A more credible fiscal policy would have been a reaffirmation of the commitment to eliminate structural budget deficit by 2014-15 by announcing some preliminary spending reductions which would go towards paying back the debt, such as scrapping the £34 billion ‘white elephant’ High Speed Rail 2 project (something Nik has blogged repeatedly about on these pages) and stop the £113 million going to trade unions every year (see Craig here), but then also say that further detailed spending reductions would be announced in the 2012 Budget with explicit aim of implementing the £216 billion cuts before 2015-16.
This course of action would allow new spending plans to be formulated in response to developments in the Eurozone. There is a need for further spending reductions if the coalition is going to put Britain back on track, keep borrowing costs and long term interest rates low, and maintain our perceived safe haven status.
 
However, George Osborne’s plan can only work if the economy starts growing again. The Autumn Statement was an opportunity for radical action but instead we got a ‘Brownite’ flurry of statistics and a plethora of small initiatives for ‘credit easing’, the Regional Growth Fund, and a ‘youth contract’.  All of which amounts to well over £10 billion at a time when we are adding another £145 billion to the national debt.
These schemes will waste taxpayers’ money on new bureaucracies and inefficiently re-allocate resources towards unproductive sectors of the economy. George Osborne has weighted his growth strategy too heavily towards a Keynesian style stimulus based on state intervention and cheap credit. He needs to bring the focus back towards supply side reform.
 
There are seeds of hope with the delay of the 3p increase in fuel duty, the aim to integrate the operation of income tax and national insurance contributions, the consultation on abolishing national pay bargaining, public sector pension reform, the liberalisation of employment legislation, and a more flexible planning system.
However, George Osborne could have been more radical. Indeed it would not be going so far as to say that it is essential for the future of the British economy that the Chancellor pursues this route instead of issuing headline grabbing micro-initiatives.
The ghosts of Keynes and Brown are well and truly alive in Her Majesty’s Treasury.
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