Osborne faces failure on the deficit after 4G auction falls short

Ed Balls set for revenge after 4G auction raises £1.16bn less than expected.

George Osborne wrongfooted Ed Balls at last year's Autumn Statement when he announced that, contrary to expectations, the deficit was forecast to fall, not rise this year. The shadow chancellor was jeered by Osborne and Cameron as he repeatedly stumbled over his pre-prepared attack lines, prompting Osborne to declare: "That was the worst reply to an Autumn Statement that I have ever heard in this house. He said one thing that was true, he said it right at the beginning. He said the deficit wasn't rising. It was a Freudian slip."

As Balls later explained: "The outside forecasters were all expecting a rise in borrowing this year, because it has risen for the first seven months ... it was impossible to work out in that first minute or two what was going on."

It was only after Balls had replied that Osborne's creative accounting emerged. In a trick worthy of Enron, the Chancellor had banked the expected £3.5bn receipts from the 4G mobile spectrum auction - even though it had yet to take place. Had he not done so, the Office for Budget Responsibility would have forecast a deficit for this year of £123.8bn, £2.4bn higher than in 2012. 

But the Chancellor's trickery has now backfired. As Alex reports, the 4G auction raised £2.34bn - £1.16bn less than expected. As a result, when he delivers the Budget on 20 March, Osborne will almost certainly be forced to announce that the deficit will be higher this year than last. Borrowing so far this financial year is £7.2bn (7.3 per cent) higher than at the same point last year, leaving Osborne £4.86bn short after the inclusion of the 4G receipts. Somewhere in Yorkshire, Keynes's rottweiler is already planning his revenge. 

Chancellor of the Exchequer George Osborne attends a press conference at the Treasury in Whitehall on February 6, 2013. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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In your 30s? You missed out on £26,000 and you're not even protesting

The 1980s kids seem resigned to their fate - for now. 

Imagine you’re in your thirties, and you’re renting in a shared house, on roughly the same pay you earned five years ago. Now imagine you have a friend, also in their thirties. This friend owns their own home, gets pay rises every year and has a more generous pension to beat. In fact, they are twice as rich as you. 

When you try to talk about how worried you are about your financial situation, the friend shrugs and says: “I was in that situation too.”

Un-friend, right? But this is, in fact, reality. A study from the Institute for Fiscal Studies found that Brits in their early thirties have a median wealth of £27,000. But ten years ago, a thirty something had £53,000. In other words, that unbearable friend is just someone exactly the same as you, who is now in their forties. 

Not only do Brits born in the early 1980s have half the wealth they would have had if they were born in the 1970s, but they are the first generation to be in this position since World War II.  According to the IFS study, each cohort has got progressively richer. But then, just as the 1980s kids were reaching adulthood, a couple of things happened at once.

House prices raced ahead of wages. Employers made pensions less generous. And, at the crucial point that the 1980s kids were finding their feet in the jobs market, the recession struck. The 1980s kids didn’t manage to buy homes in time to take advantage of low mortgage rates. Instead, they are stuck paying increasing amounts of rent. 

If the wealth distribution between someone in their 30s and someone in their 40s is stark, this is only the starting point in intergenerational inequality. The IFS expects pensioners’ incomes to race ahead of workers in the coming decade. 

So why, given this unprecedented reversal in fortunes, are Brits in their early thirties not marching in the streets? Why are they not burning tyres outside the Treasury while shouting: “Give us out £26k back?” 

The obvious fact that no one is going to be protesting their granny’s good fortune aside, it seems one reason for the 1980s kids’ resignation is they are still in denial. One thirty something wrote to The Staggers that the idea of being able to buy a house had become too abstract to worry about. Instead:

“You just try and get through this month and then worry about next month, which is probably self-defeating, but I think it's quite tough to get in the mindset that you're going to put something by so maybe in 10 years you can buy a shoebox a two-hour train ride from where you actually want to be.”

Another reflected that “people keep saying ‘something will turn up’”.

The Staggers turned to our resident thirty something, Yo Zushi, for his thoughts. He agreed with the IFS analysis that the recession mattered:

"We were spoiled by an artificially inflated balloon of cheap credit and growing up was something you did… later. Then the crash came in 2007-2008, and it became something we couldn’t afford to do. 

I would have got round to becoming comfortably off, I tell myself, had I been given another ten years of amoral capitalist boom to do so. Many of those who were born in the early 1970s drifted along, took a nap and woke up in possession of a house, all mod cons and a decent-paying job. But we slightly younger Gen X-ers followed in their slipstream and somehow fell off the edge. Oh well. "

Will the inertia of the1980s kids last? Perhaps – but Zushi sees in the support for Jeremy Corbyn, a swell of feeling at last. “Our lack of access to the life we were promised in our teens has woken many of us up to why things suck. That’s a good thing. 

“And now we have Corbyn to help sort it all out. That’s not meant sarcastically – I really think he’ll do it.”