Microsimulation of the impacts of tax, social security and public spending changes on living standards, the income distribution, poverty and health: methodological advances and an application to basic income policies

Abstract

This PhD by publication is concerned with modelling and forecasting the effects of tax and welfare policies in the UK as they affect individuals and households. There are three components to the thesis. First, I lay out the basic structure of the Landman Economics Tax-Transfer Model - the model that I have used to analyse tax and welfare reforms since its inception in 2009. I use my analysis of the distributional impact of tax and welfare reforms from 2010 to 2017 (Reed 2020) as an illustrative example. Second, I look at extending the static tax-welfare microsimulation approach in two ways: (i) forecasting the impact of changes to tax and welfare policies in future years and (ii) modelling the impact of cuts to in-kind spending on services to broaden the analysis of austerity since 2010. I use an analysis produced with Andy Harrop for the Fabian Society (Harrop and Reed 2015) as an example of forecasting the future impact of tax and welfare policies, and an example from an analysis of spending cuts in England between 2010 and 201 (Reed 2017) as a case study for modelling the impact of cuts to services.
Finally, I look in detail at using the Landman Economics Tax-Transfer Model to assess the potential costs, distributional effects and impacts on population health of Basic Income (BI) if it were to be introduced in the UK. I use the examples of distributional modelling of the impacts of BI schemes from Lansley and Reed (2019) and Reed et al. (2023) to show the distributional impacts and costs of a range of BI schemes, from a “starter” scheme where the payments for working-age adults are around the current level of Jobseekers Allowance up to a scheme which would pay sufficiently high amounts to each individual in the UK to ensure that everyone meets the Joseph Rowntree Foundation’s Minimum Income Standard as defined by researchers at the University of Loughborough (2024). The BI payments are combined with increases in direct taxes to ensure fiscal neutrality. I also discuss my most recent work using the Tax-Transfer Model which adds dynamic effects to the microsimulation of BI, using the example of my modelling in Chen et al. (2023) which uses the TTM in conjunction with a health microsimulation model at the University of Liverpool (WorkHORSE) to model the potential positive health impacts of UBI.
The summary of the underpinning research for this thesis establishes a long-term series of innovations in microsimulation modelling that has made an important empirical contribution to the analysis of recent tax and welfare policies in the UK.

Date of Award	25 Jul 2024
Original language	English
Awarding Institution	Northumbria University
Supervisor	Matthew Johnson (Supervisor) & Elliott Johnson (Supervisor)