Today’s post by Lisa Martin plots historical forecast errors by government expenditure category each year to summarize the overall impact of under-estimates of future government expenditure. Each bar is the summation of the forecast errors of the expenditure components for each budget year, compared to the latest budget estimates from the 2026 Budget Review (and described in more detail in this paper).
Expenditure forecast errors picked up substantially after the COVID-19 pandemic. Expenditure surprises were dominated by recurring operational and social outlays and State-Owned Enterprises (SOEs) support. Owing to changes in the structural classification and mechanics of SOE intervention over time (transitioning between direct budget appropriations, equity injections, and debt-takeover agreements), unplanned SOE support is not shown from the main expenditure component comparative series in the chart (but is described here). Unplanned expansions in social protection programmes is most notable in FY2020/21,driven largely by post-pandemic emergency social relief grants. Public sector wage bill settlements continuously breached baseline medium-term projections across the FY2021/22–FY2024/25 period. Rising sovereign borrowing requirements alongside elevated interest rates saw an increase in debt service costs, particularly during FY2022/23 and FY2023/24.
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