Hi, bit of an odd question to ask but I'm trying to see if an inflation calculation is correct and can't work out if it is or not.
The aim is to calculate a budget envelope for the 5 year period from 2023-2027. Just one number is needed at present for this 5 year period. The calculation to derive this is to take total actual expenditure for 2015-2020 and then to uplift this by 2% inflation. These are example numbers but will illustrate the method. Actual spend for 2015-2020 was £500m. Then this £500m has been uplifted as follows: 500 x 1.02^7 = 574.34.
The aim is to give an equivalent budget envelope for the 5 year period in question that has been uplifted by inflation. The 2021-22 period was deemed not relevant here but the inflation for this period will still be required. 2% inflation has been assumed across this whole 2015-2027 period which obviously is a big assumption.
My question is whether the calculation above is correct? It appears to be but not 100% sure. It's obviously a strange way of doing it by not doing it annually but that's whats been done. Feel free to flag any flaws in the method. Thanks in advance.