The island’s government is on course for a £30m deficit, as the impact of inflation on government finances is laid bare.
Dr Allinson revealed that the year-to-date position is showing a £23.5m operating deficit, which is £12.4m worse than the budget.
He said this was ‘due to significant inflationary pressures and the continued impact of Covid-19’.
And added: ‘There remains a great deal of uncertainty around the rest of the year given current levels of inflation and Treasury will continue to monitor and refine the forecast as the year progresses.’
By the end of the financial year, the government expects this deficit to reach £30m, before fund claims are applied. This is almost £43m worse than the budgeted surplus of £12.5m.
Dr Allinson said: ‘The forecast includes an assumed reimbursement of £59m from the internal funds, primarily the contingency fund.
‘This includes pay (up to 6%), energy costs (up to £5m) and Covid costs. This level of reimbursement presents a significant risk as it will leave the funds largely depleted.’
The full year forecast says that the government expects an income of £967m, which is about £15m higher than was in the Pink Book.
However, employee costs are forecast to be £21.3m higher than budget figures, coming in at £579.4m
Other costs, which don’t relate to pay, are projected to be £37m over budget, with an expected bill of £418m.
These figures are based on three key assumptions, including that departments were asked to use a 6% inflation assumption for pay awards unless they were aware of other agreements.
Dr Allinson said: ‘Treasury has now agreed to fund 4% of the increase from the contingency fund, with the other 2% having been built into the budget.’
He added: ‘Electricity costs were to be included at 30% inflation with other energy and fuel at 100%. Together these represent a cost pressure of just over £5m and Treasury has now agreed to fund £5m from contingency for DoI.
‘Other non-pay costs are typically assumed at up to 10% inflation which represents a £30m cost pressure.’
In August, it was said that the government was expecting a £21m overspend, which saw the DoI forecast to be £19.5m over budget.
At that time, the only department that wasn’t due to overspend its budget was the Treasury.