Summary:

The audit office will investigate the auction, which took more than £1 billion less than the government had predicted. However, the rationale for the government’s forecast remains highly questionable.

broken piggy bank

The U.K.’s National Audit Office will look into the recent 4G spectrum auction, which pulled in £2.34 billion ($3.62 billion) against a government forecast of £3.5 billion.

The news was first broken by The Guardian (see disclosure) on the weekend, and was subsequently confirmed to me by the National Audit Office (NAO) itself on Monday morning. The upcoming investigation was triggered by member of parliament Helen Goodman, who complained that the government “failed to get value for money” in the auction.

“It’s a little early to say exactly what we’re going to be looking at,” a spokesman for the NAO told me. “We will soon be in a position to put a remit of the study and a timescale on our website.”

This should be an interesting one. The telecoms regulator Ofcom, which has hailed the result as a success, has always been crystal clear on the fact that its auction was not designed to raise the maximum revenue possible (everyone has learned their lessons from the £22.5 billion 3G auction a dozen years ago, which nearly crippled the industry), but rather to keep the market competitive and make sure as many people as possible get coverage.

As for the source of the £3.5 billion figure floated by the government, there seems to be a disturbing amount of buck-passing going on. As I wrote on the auction’s completion in February:

“The reserve price for the auction was £1.3 billion, although the government had budgeted for it to bring in £3.5 billion. Does that make the result disappointing? That depends on whether you see the government forecast as politically motivated or focused on the actual worth of the spectrum. There was never much justification given for the £3.5 billion figure, and no-one appears to be taking responsibility for it — today the Treasury told me to take my questions about the figure’s rationale to the Department for Culture, Media and Sport (DCMS), and the DCMS told me to ask the Treasury.”

Now, according to The Guardian, the Treasury is claiming the figure came out of the Office for Budget Responsibility. Whoever came up with it, I’ve not seen a scrap of the rationale behind it.

It is worth noting that the £3.5 billion figure was floated last year at a time when the Chancellor of the Exchequer, George Osborne, was trying to maintain that the national deficit would fall, not rise, in 2013. Without the predicted boost from the spectrum auction, the margin would have been much smaller. And, as it turned out in last month’s Budget statement, the deficit for 2013 is indeed up on that for 2012, not down.

Disclosure: Guardian News & Media, which publishes The Guardian, is a minority investor in GigaOM.

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