12 November 2019
The Government has issued updates to income and spending figures in the Government Plan, after revised economic assumptions were issued by the independent Fiscal Policy Panel.
These new forecasts reduce estimated income by about 1% for each year of the Plan. They also reduce the amount needed to fund inflation for the four-year period, as the Treasury has re-calculated the provision required for this latest scenario.
Pay awards for 2020 were agreed using the forecast RPI at the time of 3.1%. The September RPI has now been confirmed at 2.7%. As a result, less funding is required in each year of the Plan
The Council of Ministers are proposing technical amendments to the Government Plan for 2020 to reflect these updated figures.
The changes reduce the amount allocated to pay awards in 2020 now that the September RPI has been confirmed, and they reduce the proposed transfer to the Stabilisation Fund in 2020 by £8 million. This is consistent with the advice of the Fiscal Policy Panel.
These amendments to the Plan for 2020 maintain a broadly balanced financial forecast for the year. They do not change the foundations of the Plan.
Treasury Minister, Deputy Susie Pinel, said: “Since the Government Plan was lodged, eighteen weeks before the date of the debate, we have received more up-to-date information. That includes the September 2019 RPI and updated forecasts for growth in the economy and inflation. These are both lower than those used in the Plan, which was lodged in July.
“The Treasury has now taken a prudent approach and issued technical amendments to both the expenditure forecasts for the period of the Plan, and the proposed transfers to the Stabilisation Fund.”
The Council of Ministers are also bringing forward an Addendum, setting out how these updated forecasts will change some financial elements of the Government Plan in 2021, 2022 and 2023.
Alongside this revised central forecast is an analysis of the potential impact on income and expenditure of a Day One No Deal Brexit. While the immediate threat of a D1ND Brexit may have receded, it is prudent that Government maintains contingency planning.