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Explainer

What's the next frontier for policy modelling?

Tax and benefit models play a vital role in scrutinising government decisions and opening up the policy making process. They are core pieces of social policy infrastructure. JRF is exploring how they could have an even bigger impact, by being able to do more and by being open to a wider range of users. If you have ideas, we want to hear from you.

Written by:
Rosario Piazza
Date published:
Reading time:
4 minutes

Just a few hours after the Chancellor, Jeremy Hunt, delivered his Budget speech, analysts and commentators were able to provide the public with a rapid picture of the winners and losers from the policies announced, without having to rely on Treasury produced figures.

This is only possible because of the existence of so-called ‘tax-benefit microsimulation models’, which play a vital role in enabling people outside government to scrutinise policy decisions that affect millions of households. These models also make it possible to assess the likely costs and impact of a wide array of options, thereby opening up the policy making process.

What is microsimulation?

You may not have heard of ‘microsimulation’, but if you follow our work at JRF – or indeed the work of many think tanks, research or policy organisations – the chances are you will have come across some of its products. In a nutshell, microsimulation models use ‘micro’ data (for example, data at the individual and household level) to ‘simulate’ a change in policy. This makes is possible to answer a wide range of research questions and generate a wide range of insights.

For example, the forecast produced by the Resolution Foundation after the Budget that the proportion of children living in absolute poverty is projected to be higher in 2026-27 than in 2016-17 was generated using a microsimulation model. Closer to home, the design of JRF and the Trussell Trust’s recently-launched Essentials Guarantee policy, to anchor the basic rate of social security to core living costs, was also underpinned by microsimulation modelling.

JRF thinks this is an important piece of infrastructure

When tax-and-benefit microsimulation models first became commonly available outside government over a decade ago, they represented a transformative change, allowing a range of organisations to more effectively scrutinise policy decisions and generate actionable ideas. More recently, online tools have emerged that allow the impact of policy options to be explored. However, the core functionality of these models have not significantly advanced since their inception, and barriers remain, especially for non-technical users.

Therefore, as part of JRF’s commitment to nurturing and supporting insight-generating infrastructure to advance social change for the public good, we are exploring what might be the next frontier of microsimulation in the UK (to enhance its functionality and accessibility).

As an example, the existing tax-and-benefit models currently focus on income. Incorporating other kinds of data, such as on wealth and consumption, could allow users to analyse a wider range of policy options and to present a more comprehensive picture of living standards. Similarly, place-based data could enable models to generate sub-national insights. Or maybe there are more radical options, like forecasting other outcomes, like health or wider economy impacts of policy choices.

Help us make it more accessible

If you use one of the existing tax-benefit models, what else would you like them to be able to do? If you’re interested in using microsimulation models but don’t currently do so, what prevents you? If you engage with the outputs of models, via charts, reports or press releases, what else would you like to see them be able to do? What research questions would you like to answer? What polices would you like to be able to cost and model?

We are exploring these questions – and the opportunities for supporting the next frontier of microsimulation modelling – over the next couple of months. If you wish to find out more, or explore opportunities for collaboration, please contact me by the end of April: rosario.piazza@jrf.org.uk