SPI income imputation gives every child in a synthetic household employment income (£67bn on under-16s) #504

Every child in an SPI-synthetic household has imputed employment income. In the Enhanced FRS 2024-25 that puts £67bn of employment income (5.9% of the total) on people aged under 16.

Found while fixing PolicyEngine/policyengine-uk#1976 (Universal Credit counted dependants' income, so these earnings were cutting the parents' UC).

Evidence

Enhanced FRS 2024-25 file with sha256 e433e532… (person and household tables read directly; weights are household_weight). Aggregates only.

The same split holds at every age below 16 (ages 0-4, 5-10 and 11-15 are each 100% in synthetic households and 0% in FRS-origin ones). At 16-17 it is 96% against 4%. In the capital-gains clones the pattern is the same, because they copy the rows.

Among these children: none has hours_worked, all have employment_status CHILD, and 69% also have savings interest. Their positive employment income has weighted quartiles of about £7,000, £18,500 and £27,000, against £9,900, £20,600 and £28,700 for people aged 16 to 24.

Synthetic households carry 27% of household weight (8.4m of 31.1m), so this is not a tail.

Mechanism (read on main at b45c373)

policyengine_uk_data/datasets/imputations/income.py:

• impute_income copies the whole FRS, sets the copy's weight to 0, flags it household_is_spi_synthetic and subsamples it to 10,000 households (lines 261-265). Children stay in the copy.
• It then calls impute_over_incomes(zero_weight_copy, model, IMPUTATIONS) (lines 271-275). That function takes age, gender and region for every person in the dataset, runs model.predict, and overwrites each income component with the prediction (lines 218-222). There is no age condition.
• The model is trained on the SPI. SPI ages are drawn within AGE_RANGES, whose lowest bound is 16 (datasets/spi.py lines 15-24), so no training row is under 16. A child is scored from age, gender and region alone, so gets the earnings of a young taxpayer.
• Nothing later removes them: the second-stage impute_frs_only_variables uses employment_income as a predictor, the capital-gains step copies the rows, and calibration gives the synthetic households weight.

The components overwritten are employment, self-employment, savings interest, dividends, private pension and property income, plus Gift Aid and charitable investment gifts. Employment income is the large one for children. The dividend-only pass on FRS-origin rows (lines 295-299) also predicts for every person, children included (3.7% of under-16s in both halves have dividends).

What it does to results

Real policyengine-uk microsimulations for 2026 (policyengine-uk at baff2d793), on the file as built and on a copy with under-16 employment_income set to zero and nothing else changed:

This is a sensitivity, not a rebuilt dataset: the weights were calibrated with the children's earnings in place, so a rebuild would move them. It may bear on #487 (median income above HBAI) and #452 (UC caseload below administrative counts).

The UC line is the part policyengine-uk#1976 fixes on the model side: once UC counts only claimants' income, UC is £83.7bn with or without the children's earnings (identical for every benefit unit, 2025 to 2030).

Proposed fix

• In impute_over_incomes, predict only for people the SPI can describe (aged 16 or over) and leave younger people's incomes at their FRS values. Apply the same condition to the dividend-only pass.
• Consider the same check for 16- and 17-year-olds in full-time non-advanced education, who are dependent children in the FRS and 96% of whom get earnings in the synthetic half (4% in the FRS half).
• Add a build test: after impute_income, no one under 16 has employment, self-employment, pension or property income above their FRS value.
• Recalibrate, since the employment income total and the SPI targets were met with these amounts included.

How to verify

1. The table above reproduces from the person and household tables by grouping under-16 records on household_is_spi_synthetic.
2. After the fix, weighted under-16 employment income is about zero and income tax paid by under-16s is about zero.
3. Compare child poverty and median income with HBAI before and after.