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.

Getty
Show Hide image

Why the Liberal Democrats by-election surge is not all it seems

The Lib Dems chalked up impressive results in Stoke and Copeland. But just how much of a fight back is it?

By the now conventional post-Brexit logic, Stoke and Copeland ought to have been uniquely inhospitable for the Lib Dems. 

The party lost its deposit in both seats in 2015, and has no representation on either council. So too were the referendum odds stacked against it: in Stoke, the so-called Brexit capital of Britain, 70 per cent of voters backed Leave last June, as did 62 per cent in Copeland. And, as Stephen has written before, the Lib Dems’ mini-revival has so far been most pronounced in affluent, Conservative-leaning areas which swung for remain. 

So what explains the modest – but impressive – surges in their vote share in yesterday’s contests? In Stoke, where they finished fifth in 2015, the party won 9.8 per cent of the vote, up 5.7 percentage points. They also more than doubled their vote share in Copeland, where they beat Ukip for third with 7.3 per cent share of the vote.

The Brexit explanation is a tempting and not entirely invalid one. Each seat’s not insignificant pro-EU minority was more or less ignored by most of the national media, for whom the existence of remainers in what we’re now obliged to call “left-behind Britain” is often a nuance too far. With the Prime Minister Theresa May pushing for a hard Brexit and Labour leader Jeremy Corbyn waving it through, Lib Dem leader Tim Farron has made the pro-EU narrative his own. As was the case for Charles Kennedy in the Iraq War years, this confers upon the Lib Dems a status and platform they were denied as the junior partners in coalition. 

While their stance on Europe is slowly but surely helping the Lib Dems rebuild their pre-2015 demographic core - students, graduates and middle-class professionals employed in the public sector – last night’s results, particularly in Stoke, also give them reason for mild disappointment. 

In Stoke, campaign staffers privately predicted they might manage to beat Ukip for second or third place. The party ran a full campaign for the first time in several years, and canvassing returns suggested significant numbers of Labour voters, mainly public sector workers disenchanted with Corbyn’s stance on Europe, were set to vote Lib Dem. Nor were they intimidated by the Brexit factor: recent council by-elections in Sunderland and Rotheram, which both voted decisively to leave, saw the Lib Dems win seats for the first time on massive swings. 

So it could well be argued that their candidate, local cardiologist Zulfiqar Ali, ought to have done better. Staffordshire University’s campus, which Tim Farron visited as part of a voter registration drive, falls within the seat’s boundaries. Ali, unlike his Labour competitor Gareth Snell and Ukip leader Paul Nuttall, didn’t have his campaign derailed or disrupted by negative media attention. Unlike the Tory candidate Jack Brereton, he had the benefit of being older than 25. And, like 15 per cent of the electorate, he is of Kashmiri origin.  

In public and in private, Lib Dems say the fact that Stoke was a two-horse race between Labour and Ukip ultimately worked to their disadvantage. The prospect of Nuttall as their MP may well have been enough to convince a good number of the Labour waverers mentioned earlier to back Snell. 

With his party hovering at around 10 per cent in national polls, last night’s results give Farron cause for optimism – especially after their near-wipeout in 2015. But it’s easy to forget the bigger picture in all of this. The party have chalked up a string of impressive parliamentary by-election results – second in Witney, a spectacular win in Richmond Park, third in Sleaford and Copeland, and a strong fourth in Stoke. 

However, most of these results represent a reversion to, or indeed an underperformance compared to, the party’s pre-2015 norm. With the notable exception of Richmond’s Sarah Olney, who only joined the Lib Dems after the last general election, these candidates haven’t - or the Lib Dem vote - come from nowhere. Zulfiqar Ali previously sat on the council in Stoke and had fought the seat before, and Witney’s Liz Leffman and Sleaford’s Ross Pepper are both popular local councillors. And for all the excited commentary about Richmond, it was, of course, held by the Lib Dems for 13 years before Zac Goldsmith won it for the Tories in 2010. 

The EU referendum may have given the Lib Dems a new lease of life, but, as their #LibDemFightback trope suggests, they’re best understood as a revanchist, and not insurgent, force. Much has been said about Brexit realigning our politics, but, for now at least, the party’s new normal is looking quite a lot like the old one.