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Opening the Black Box: towards a transparent and widely-used tax-benefit model for the UK

Background

Tax-benefit models are used to answer “what if” questions about the effects of specific tax and benefit reforms on household incomes. Arithmetic calculations are carried out for each household in a dataset that is representative of the population and thereby the effects on the overall public budget, across the distribution of income and by household characteristics are obtained. Such analysis is regularly performed for Budget and other Government policy announcements and is also highly relevant for the design of alternative reforms and new policy instruments. There are a number of UK tax-benefit models that are regularly maintained and updated but they are usually private, expensive to develop and require specialised skills to use them effectively.

Project aims

The exception is the UK component of the EU model, EUROMOD. This project will consolidate EUROMOD-UK as a reliable, flexible, accessible and transparent tax-benefit model and will adapt and extend it to increase its relevance for UK policy analysis. We will also develop a simplified approach to using selected parts of the model by non-expert users. The overall aim is to meet the demand for tax-benefit modelling capacity among UK organisations (and individuals) and to promote its use more widely as a way to improve the evidence base to better inform current policy debates.

Methods

First, we propose a series of developments to make EUROMOD-UK more relevant for in-depth and timely UK policy by reviewing our methods and procedures to establish a regular release of EUROMOD-UK 6 weeks before the Autumn Budget, based on the most recently-released Family Resources Survey (FRS) data and with policies and incomes projected to the following fiscal year.

Second, we will add features that will facilitate the analysis of policy options in Scotland, Wales, Northern Ireland and England separately as well as the UK as a whole. We will also review the income concepts and measurements used in outcome measures of household income with reference to those used in key UK statistics such as the DWP’s Households Below Average Income (HBAI) in order to minimise differences in estimates of income distribution and poverty from EUROMOD’s.

Finally, we propose innovations to make the straightforward use of the model less complex and more user-friendly for non-academic and novice audiences. These include building a platform to generate simplified user interfaces offering limited choices, a standard UK simplified interface with certain set default options and customisable interfaces for particular interests.

We will create a Case Study to provide some concrete illustrations of the ways in which tax-benefit modelling can be used to understand the effects and implications of complex reforms using the introduction of a Basic Income (BI) into the UK tax-benefit system as an example.

Team members

Professor Mike Brewer

Director of MiSoC - ISER, University of Essex


Professor Holly Sutherland

Research Professor - ISER, University of Essex


Dr Chrysa Leventi

Research Fellow - ISER, University of Essex


Kostas Manios

EUROMOD software developer - ISER, University of Essex


Dr Paola De Agostini

Senior Research Officer - ISER, University of Essex


Iva Tasseva

Senior Research Officer - ISER, University of Essex


Dr Jack Kneeshaw

EUROMOD Executive Director - ISER, University of Essex


Uk money