Osborne's 4G hopes fall flat

Wide-eyed hopes of a windfall, inspired by successful sales in other countries, ended in tears as the sell-off of 4G mobile airwaves raised only two-thirds of what was expected at £2.34 billion.

Despite a modest reserve of £1.3bn, the final price was well below the £3.5bn estimated by the Office for Budget Responsibility.

In contrast, the previous 3G auction raised £22.5bn for the Treasury in 2000 and the Netherlands picked up £3.1bn for its 4G spectrum in December, while Ireland received a nifty £700 million.

The new networks will allow smartphone and tablet computer users to access superfast download speeds, with a music album that takes 20 minutes to download on a 3G phone taking just over three minutes on 4G.

All the major mobile phone companies such as EE, Hutchison 3G, O2 parent Telefonica and Vodafone were successful in the bidding process today, with a BT subsidiary also picking up a licence.

But the government is only getting a one-off lump sum after the auction by regulator Ofcom for the 20-year licences, with licences set to be handed back to the regulatory body after 2033 unless operators pay annual fees.

Ofcom chief executive Ed Richards said today that the aim was not to maximise revenue but to provide as good a service as possible.

But shadow chief secretary to the Treasury Rachel Reeves said: "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."

She added that the public must "look out for more smoke and mirrors" when today's borrowing figures are published.

"Whatever wheezes George Osborne tries, he cannot hide from the fact that no growth on his watch has led to billions more borrowing as the costs of economic failure mount."