Fix abolishing council tax having no budget impact (#1153)

changelog.d/fix-abolish-council-tax.fixed.md

@@ -0,0 +1 @@
+Fix abolishing council tax having no budget impact.

policyengine_uk/tests/microsimulation/reforms_config.yaml

@@ -16,7 +16,7 @@ reforms:
   parameters:
     gov.hmrc.child_benefit.amount.additional: 25
 - name: Reduce Universal Credit taper rate to 20%
-  expected_impact: -43.2
+  expected_impact: -42.0
   parameters:
     gov.dwp.universal_credit.means_test.reduction_rate: 0.2
 - name: Raise Class 1 main employee NICs rate to 10%

policyengine_uk/tests/microsimulation/test_abolish_council_tax.py

@@ -0,0 +1,55 @@
+"""Test that abolishing council tax has a budgetary impact (#1153)."""
+
+import pytest
+from policyengine_uk import Microsimulation
+from policyengine_uk.model_api import Scenario
+
+YEAR = 2025
+CT_AMOUNT = 2000
+
+SITUATION = {
+    "people": {
+        "person": {
+            "age": {YEAR: 30},
+            "employment_income": {YEAR: 30000},
+        },
+    },
+    "benunits": {"benunit": {"members": ["person"]}},
+    "households": {
+        "household": {
+            "members": ["person"],
+            "council_tax": {YEAR: CT_AMOUNT},
+        },
+    },
+}
+
+
+@pytest.fixture(scope="module")
+def baseline_net_income():
+    sim = Microsimulation(situation=SITUATION)
+    return float(sim.calculate("household_net_income", YEAR).sum())
+
+
+@pytest.fixture(scope="module")
+def reform_net_income():
+    scenario = Scenario(
+        parameter_changes={
+            "gov.contrib.abolish_council_tax": {str(YEAR): True}
+        }
+    )
+    sim = Microsimulation(situation=SITUATION, scenario=scenario)
+    return float(sim.calculate("household_net_income", YEAR).sum())
+
+
+def test_abolish_council_tax_increases_net_income(
+    baseline_net_income, reform_net_income
+):
+    diff = reform_net_income - baseline_net_income
+    assert diff > 0
+
+
+def test_abolish_council_tax_increases_by_council_tax_amount(
+    baseline_net_income, reform_net_income
+):
+    diff = reform_net_income - baseline_net_income
+    assert abs(diff - CT_AMOUNT) < 100

policyengine_uk/variables/contrib/policyengine/pre_budget_change_household_benefits.py

@@ -44,12 +44,6 @@ def formula(household, period, parameters):
         contrib = parameters(period).gov.contrib
         uprating = contrib.benefit_uprating
         benefits = pre_budget_change_household_benefits.adds
-        if contrib.abolish_council_tax:
-            benefits = [
-                benefit
-                for benefit in benefits
-                if benefit != "council_tax_benefit"
-            ]
         general_benefits = add(
             household,
             period,

policyengine_uk/variables/contrib/policyengine/pre_budget_change_household_tax.py

@@ -14,7 +14,7 @@ class pre_budget_change_household_tax(Variable):
         "expected_lbtt",
         "corporate_sdlt",
         "business_rates",
-        "council_tax",
+        "council_tax_applicable",
         "domestic_rates",
         "fuel_duty",
         "tv_licence",
@@ -27,17 +27,3 @@ class pre_budget_change_household_tax(Variable):
         "vat_change",
         "capital_gains_tax",
     ]
-
-    def formula(household, period, parameters):
-        if parameters(period).gov.contrib.abolish_council_tax:
-            return add(
-                household,
-                period,
-                [
-                    tax
-                    for tax in pre_budget_change_household_tax.adds
-                    if tax not in ["council_tax"]
-                ],
-            )
-        else:
-            return add(household, period, pre_budget_change_household_tax.adds)

policyengine_uk/variables/gov/gov_tax.py

@@ -16,7 +16,7 @@ class gov_tax(Variable):
         "expected_lbtt",
         "corporate_sdlt",
         "business_rates",
-        "council_tax",
+        "council_tax_applicable",
         "domestic_rates",
         "fuel_duty",
         "tv_licence",
@@ -34,12 +34,3 @@ class gov_tax(Variable):
         "student_loan_repayments",
         "vat",
     ]
-
-    def formula(household, period, parameters):
-        variables = list(gov_tax.adds)
-        if parameters(period).gov.contrib.abolish_council_tax:
-            variables = [
-                variable for variable in variables if variable != "council_tax"
-            ]
-
-        return add(household, period, variables)

policyengine_uk/variables/gov/hmrc/household_tax.py

@@ -14,7 +14,7 @@ class household_tax(Variable):
         "expected_lbtt",
         "corporate_sdlt",
         "business_rates",
-        "council_tax",
+        "council_tax_applicable",
         "domestic_rates",
         "fuel_duty",
         "tv_licence",
@@ -33,17 +33,3 @@ class household_tax(Variable):
         "employer_ni_response_consumer_incidence",
         "student_loan_repayments",
     ]
-
-    def formula(household, period, parameters):
-        if parameters(period).gov.contrib.abolish_council_tax:
-            return add(
-                household,
-                period,
-                [
-                    tax
-                    for tax in household_tax.adds
-                    if tax not in ["council_tax"]
-                ],
-            )
-        else:
-            return add(household, period, household_tax.adds)

policyengine_uk/variables/gov/local/council_tax_applicable.py

@@ -0,0 +1,16 @@
+from policyengine_uk.model_api import *
+
+
+class council_tax_applicable(Variable):
+    value_type = float
+    entity = Household
+    label = "Council Tax (after abolition check)"
+    documentation = "Council Tax amount, or zero if council tax is abolished"
+    definition_period = YEAR
+    unit = GBP
+    quantity_type = FLOW
+
+    def formula(household, period, parameters):
+        council_tax = household("council_tax", period)
+        abolish = parameters(period).gov.contrib.abolish_council_tax
+        return where(abolish, 0, council_tax)

policyengine_uk/variables/household/income/hbai_household_net_income.py

@@ -58,7 +58,7 @@ class hbai_household_net_income(Variable):
         # Reference for tax-free-childcare: https://assets.publishing.service.gov.uk/media/5e7b191886650c744175d08b/households-below-average-income-1994-1995-2018-2019.pdf
     ]
     subtracts = [
-        "council_tax",
+        "council_tax_applicable",
         "domestic_rates",
         "income_tax",
         "national_insurance",

policyengine_uk/variables/household/income/household_benefits.py

@@ -57,12 +57,6 @@ def formula(household, period, parameters):
         contrib = parameters(period).gov.contrib
         uprating = contrib.benefit_uprating
         benefits = household_benefits.adds
-        if contrib.abolish_council_tax:
-            benefits = [
-                benefit
-                for benefit in benefits
-                if benefit != "council_tax_benefit"
-            ]
         general_benefits = add(
             household,
             period,