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9.3  Alternative scenarios

The 2009 Statement included an alternative projection of welfare spending, which differed from that used in the two main scenarios of the 2009 Statement (historic trends and sustainable debt). This alternative scenario for welfare spending involved an assumed reduction in SB and IB recipient numbers, from 140,000 to 100,000 in 2013, and ceasing the inflation-indexation of WFF tax credits. It was outlined in the Benefits section of the 2009 Statement and incorporated into the rebalancing scenario discussed in the subsequent Combined Scenarios section.

The change in modelling of the WFF tax credits for the alternative projection involves:

  • separating WFF historical and forecast data from other welfare assistance and expenses data in the model, and
  • growing the new WFF projection in the same way as other welfare assistance and expenses, as described earlier, but removing the annual inflation driver.

Creating the reduced SB and IB recipient number projection was more involved, as outlined in the following four steps.

1. Separate SB and IB historical and forecast expenditure data from that of DPB.

2. Apply the same projection drivers to the two separate lines (SB and IB, and DPB), as described earlier, except for DPB the historic proportion of recipients in each age and gender group is just based on DPB while for SB and IB the average excludes DPB proportions.

3. Reduce the end-of-forecast combined SB and IB expenditure base, used in the first projected year formula, by a ratio of 100/150. This reflects that the Budget 2009 forecast of combined SB and IB numbers was 150,000 in the year ended June 2013, while the scenario assumes this figure is reduced to 100,000 by this time.

4. After the adjustment in step (3), grow SB and IB expenditure by the manner outlined in step (2).

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