Apply the Universal Credit Act 2025 standard allowance uplifts to 2029-30

changelog.d/2239.fixed.md

@@ -0,0 +1 @@
+Apply the Universal Credit Act 2025 s. 1 uplifts to the Universal Credit standard allowance for 2027-28 to 2029-30 (3.1%, 4.0% and 4.8% above the CPI-only path from 2025-26). The allowance is now uprated by a dedicated index, benefit uprating CPI times one plus the uplift, so it grows by CPI times the change in uplift each year after the legislated 2026-27 rates, and by CPI alone after 2029-30. Switching the rebalancing reforms off, or changing a later year's uplift, now moves those years. `standard_allowance_uplift` was previously not read.

docs/book/policy/uc-rebalancing.md

@@ -33,22 +33,24 @@ Whether a benefit unit gets the new-claimant rate is the benefit unit's `uc_rece
 
 ## Standard allowance uplifts
 
-The standard allowance receives additional percentage uplifts beyond the normal inflationary increase:
+Universal Credit Act 2025 s. 1 sets the minimum standard allowance for 2026-27 to 2029-30. Each year's minimum is the previous year's CPI-uprated amount (the 2025-26 amount for 2026-27), increased by September CPI (never below 0%), and then by that year's uplift:
 
-- 2026: 2.3% additional uplift
-- 2027: 3.1% additional uplift (cumulative)
-- 2028: 4.0% additional uplift (cumulative)
-- 2029: 4.8% additional uplift (cumulative)
+- 2026-27: 2.3%
+- 2027-28: 3.1%
+- 2028-29: 4.0%
+- 2029-30: 4.8%
 
-These uplifts are applied to the CPI-uprated standard allowance for each year. In other words, the model first applies the usual CPI uprating and then applies the rebalancing uplift on top.
+Each uplift is measured against the CPI-only path from 2025-26, not compounded on the previous one, so from one year to the next the allowance grows by CPI times (1 + this year's uplift) / (1 + last year's uplift). After 2029-30 the uplift stays at 4.8% and the allowance grows with CPI alone.
+
+The 2026-27 amounts are the legislated rates in `standard_allowance/amount.yaml`, used as they are. Later years are uprated by `gov.dwp.universal_credit.standard_allowance.uprating`, which `rebalancing/create_standard_allowance_uprating.py` builds when parameters are processed: the benefit uprating CPI index times one plus the uplift. For a legislated year the uplift is the one its rates include (2.3% for 2026-27); for later years it is the uplift in force. So switching `rebalancing.active` off, or changing a later year's uplift, moves every year after 2026-27, which stays at its legislated rates. To change 2026-27 itself, set `gov.dwp.universal_credit.standard_allowance.amount`.
 
 ## Implementation
 
 ```{tip}
 The reforms are implemented through parameters, scenario modifiers, and scenarios that work together to enable policy analysis.
 ```
 
-- **Parameters**: YAML files define the reform's activation status, the health element amounts for new claimants and for protected (pre-2026) claimants, and the standard allowance uplift rates.
+- **Parameters**: YAML files define the reform's activation status, the health element amounts for new claimants and for protected (pre-2026) claimants, and the standard allowance uplift rates. The uplift reaches the standard allowance through its uprating index.
 - **Scenario modifier**: The `add_universal_credit_reform` function applies the protected existing-claimant health-element path during microsimulation.
 - **Scenario**: The `universal_credit_july_2025_reform` scenario enables the reforms in policy analysis.
 
@@ -71,26 +73,30 @@ scenario = Scenario(
 sim = Simulation(scenario=scenario)
 ```
 
+The 2026-27 standard allowance stays at its legislated rates, which include the 2.3% uplift; from 2027-28 it follows CPI alone from the 2026-27 rates less that uplift.
+
 ### Changing the standard allowance uplift parameters
 
 ```python
 from policyengine_uk import Simulation, Scenario
 
-# Set different uplift rates - e.g. 5% in 2026, 7% in 2027
+# Set different uplift rates from 2027-28 (2026-27 is legislated), e.g. 7%.
+# A bare year names the fiscal year from 6 April.
 scenario = Scenario(
     parameter_changes={
         "gov.dwp.universal_credit.rebalancing.standard_allowance_uplift": {
-            "2026-01-01": 0.05,
-            "2027-01-01": 0.07,
-            "2028-01-01": 0.07,
-            "2029-01-01": 0.07,
+            "2027": 0.07,
+            "2028": 0.07,
+            "2029": 0.07,
         }
     }
 )
 
 sim = Simulation(scenario=scenario)
 ```
 
+The uplift reaches the allowance through parameter processing, which `Scenario(parameter_changes=...)` re-runs. A `reform=` dictionary is applied after processing, so to change the allowance that way set `gov.dwp.universal_credit.standard_allowance.amount` directly.
+
 ### Changing the health element amount for new claimants
 
 ```python
@@ -110,8 +116,9 @@ sim = Simulation(scenario=scenario)
 
 ## Legislative reference
 
-The reforms are based on the Universal Credit Bill and its impact assessment:
+The reforms are based on the Universal Credit Act 2025, the Bill and its impact assessment:
 
+- https://www.legislation.gov.uk/ukpga/2025/22/section/1
 - https://bills.parliament.uk/publications/62123/documents/6889
 - https://bills.parliament.uk/publications/62124/documents/6892
 - https://assets.publishing.service.gov.uk/media/689ca49e1c63de6de5bb1298/withdrawn-universal-credit-bill-uc-rebalancing-impact-assessment.pdf

policyengine_uk/parameters/gov/dwp/universal_credit/rebalancing/create_standard_allowance_uprating.py

@@ -0,0 +1,166 @@
+"""Build the uprating index for the Universal Credit standard allowance.
+
+Universal Credit Act 2025 s. 1 sets minimum standard allowance amounts for
+tax years 2026-27 to 2029-30 in three steps:
+
+1. Take the 2025-26 amounts for 2026-27, and the previous year's Step 2
+   amounts for each later year.
+2. Increase them by the relevant CPI percentage, never below 0% (s. 1(3)).
+3. Increase the result by the relevant uplift percentage for the year: 2.3%,
+   3.1%, 4.0% and 4.8% (s. 1(4)).
+
+Each uplift is measured against the CPI-only path from 2025-26, not compounded
+on the previous uplift, because Step 1 takes the previous year's amount before
+its Step 3. From one year to the next the allowance therefore grows by CPI
+times (1 + this year's uplift) / (1 + last year's uplift).
+
+The legislated amounts (2026-27 so far) are written into
+``standard_allowance/amount.yaml`` and used as they are. Later years are
+uprated by the index built here, ``gov.dwp.universal_credit.standard_allowance
+.uprating``: the benefit uprating index ``gov.benefit_uprating_cpi``, with
+s. 1(3)'s 0% floor in 2026-27 to 2029-30, times one plus the uplift. For a
+year with legislated amounts the uplift is the one those amounts include, from
+the s. 1(4) table; for later years it is the uplift in force (nil with
+``rebalancing.active`` false). Uprating the legislated amounts by the index
+gives each later year the CPI growth and the change in uplift, so switching
+rebalancing off, or changing a later year's uplift, reaches every year after
+the legislated ones; changing a legislated year needs its amount set. After
+2029-30 the uplift stays at 4.8%, so the allowance grows with CPI alone.
+
+The benefit index is the model's measure of CPI for benefit uprating; s. 1(3)
+names September CPI. Because it is the same index, the difference from a
+CPI-only path is exactly the uplift. It is read on 30 April of each year, the
+date fiscal-year conversion samples, as uprating will extend it, so a reform to
+the benefit index reaches the allowance in the fiscal year it covers.
+
+This runs in ``process_parameters`` before uprating, so a parameter change
+made through ``Scenario(parameter_changes=...)``, which re-runs that pipeline,
+reaches the allowance. A ``reform=`` dict applied after processing does not
+re-run uprating; set ``standard_allowance.amount`` directly instead.
+"""
+
+from functools import lru_cache
+from pathlib import Path
+
+import yaml
+from policyengine_core.parameters import Parameter, ParameterNode, get_parameter
+
+INDEX_NAME = "gov.dwp.universal_credit.standard_allowance.uprating"
+AMOUNT_FILE = Path(__file__).parents[1] / "standard_allowance" / "amount.yaml"
+# Universal Credit Act 2025 s. 1(1): tax years 2026-27 to 2029-30.
+FIRST_ACT_YEAR = 2026
+LAST_ACT_YEAR = 2029
+# s. 1(4): the uplift included in a legislated amount for each tax year.
+LEGISLATED_UPLIFT = {2026: 0.023, 2027: 0.031, 2028: 0.040, 2029: 0.048}
+
+
+def tax_year_instant(year: int) -> str:
+    """Date at which policy parameters are read for the tax year from April
+    ``year``: 30 April, the date fiscal-year conversion samples."""
+    return f"{year}-04-30"
+
+
+def tax_year(instant_str: str) -> int:
+    """Tax year of a dated amount. Rates are dated from the start of April,
+    before the 6 April start of the tax year they apply to."""
+    year, month = int(instant_str[:4]), int(instant_str[5:7])
+    return year if month >= 4 else year - 1
+
+
+def uplift_in_force(rebalancing: ParameterNode, year: int) -> float:
+    instant = tax_year_instant(year)
+    if not rebalancing.active(instant):
+        return 0.0
+    uplift = rebalancing.standard_allowance_uplift(instant)
+    # Nil before the uplift parameter starts (2025-26).
+    return 0.0 if uplift is None else uplift
+
+
+@lru_cache(maxsize=1)
+def last_legislated_year() -> int:
+    """The latest tax year with a legislated amount in amount.yaml for every
+    claimant type. Read from the file, so a reform that replaces an amount
+    does not change which years are legislated."""
+    data = yaml.safe_load(AMOUNT_FILE.read_text())
+    return min(
+        max(
+            tax_year(str(instant))
+            for instant, value in node["values"].items()
+            if value is not None
+        )
+        for node in data.values()
+        if isinstance(node, dict) and "values" in node
+    )
+
+
+def benefit_index_values(parameters: ParameterNode) -> dict:
+    """``gov.benefit_uprating_cpi`` for each year of its uprating index, as
+    uprating will extend it: its own values up to its latest one, then that
+    value moved with its uprating index. Each year is read on 30 April and
+    keyed by 1 January, as the index is."""
+    benefit_index = parameters.gov.benefit_uprating_cpi
+    cpi_index = get_parameter(parameters, benefit_index.metadata["uprating"])
+    last_instant = benefit_index.values_list[0].instant_str
+    value_at_last = benefit_index(last_instant)
+    cpi_at_last = cpi_index(last_instant)
+    values = {}
+    for entry in sorted(cpi_index.values_list, key=lambda e: e.instant_str):
+        instant = tax_year_instant(int(entry.instant_str[:4]))
+        if instant <= last_instant or cpi_at_last is None:
+            values[entry.instant_str] = benefit_index(instant)
+        else:
+            values[entry.instant_str] = value_at_last * cpi_index(instant) / cpi_at_last
+    return values
+
+
+def add_uc_standard_allowance_uprating(parameters: ParameterNode) -> ParameterNode:
+    universal_credit = parameters.gov.dwp.universal_credit
+    rebalancing = universal_credit.rebalancing
+    standard_allowance = universal_credit.standard_allowance
+    legislated_through = last_legislated_year()
+
+    values = {}
+    cpi_path = 1.0
+    previous_cpi = None
+    for instant, cpi in benefit_index_values(parameters).items():
+        year = int(instant[:4])
+        if cpi is None:
+            continue
+        if previous_cpi is not None:
+            growth = cpi / previous_cpi
+            if FIRST_ACT_YEAR <= year <= LAST_ACT_YEAR:
+                growth = max(1.0, growth)
+            cpi_path *= growth
+        previous_cpi = cpi
+        if year <= legislated_through and year in LEGISLATED_UPLIFT:
+            # The uplift the legislated amounts for this year include.
+            uplift = LEGISLATED_UPLIFT[year]
+        else:
+            uplift = uplift_in_force(rebalancing, year)
+        values[instant] = cpi_path * (1 + uplift)
+
+    standard_allowance.add_child(
+        "uprating",
+        Parameter(
+            name=INDEX_NAME,
+            data={
+                "description": (
+                    "Uprating index for the Universal Credit standard "
+                    "allowance: benefit uprating CPI times one plus the "
+                    "Universal Credit Act 2025 uplift."
+                ),
+                "values": values,
+                "metadata": {
+                    "unit": "/1",
+                    "label": "Universal Credit standard allowance uprating index",
+                    "reference": [
+                        {
+                            "title": "Universal Credit Act 2025 s. 1",
+                            "href": "https://www.legislation.gov.uk/ukpga/2025/22/section/1",
+                        }
+                    ],
+                },
+            },
+        ),
+    )
+    return parameters

policyengine_uk/parameters/gov/dwp/universal_credit/rebalancing/standard_allowance_uplift.yaml

@@ -1,13 +1,13 @@
-description: Uplift in the Standard Allowance for Universal Credit, in addition to the annual inflationary increase, compared to 2025-26 levels.
+description: Uplift to the Universal Credit standard allowance above CPI-only uprating from its 2025-26 level (the relevant uplift percentage). It is not compounded on the previous year's uplift.
 values:
-  2025-01-01: 0.000
-  2026-01-01: 0.023
-  2027-01-01: 0.031
-  2028-01-01: 0.040
-  2029-01-01: 0.048
+  2025-04-06: 0.000
+  2026-04-06: 0.023
+  2027-04-06: 0.031
+  2028-04-06: 0.040
+  2029-04-06: 0.048
 metadata:
   unit: /1
   label: Universal Credit rebalancing standard allowance uplift
   reference:
-    - title: Universal Credit Bill
-      href: https://bills.parliament.uk/publications/62123/documents/6889
+    - title: Universal Credit Act 2025 s. 1(4)
+      href: https://www.legislation.gov.uk/ukpga/2025/22/section/1

policyengine_uk/parameters/gov/dwp/universal_credit/standard_allowance/amount.yaml

@@ -19,7 +19,7 @@ SINGLE_YOUNG:
     2026-04-01: 338.58
   metadata:
     label: Universal Credit single amount (under 25)
-    uprating: gov.benefit_uprating_cpi
+    uprating: gov.dwp.universal_credit.standard_allowance.uprating
     unit: currency-GBP
     period: month
 SINGLE_OLD:
@@ -42,7 +42,7 @@ SINGLE_OLD:
     2026-04-01: 424.9
   metadata:
     label: Universal Credit single amount (over 25)
-    uprating: gov.benefit_uprating_cpi
+    uprating: gov.dwp.universal_credit.standard_allowance.uprating
     unit: currency-GBP
     period: month
 COUPLE_YOUNG:
@@ -65,7 +65,7 @@ COUPLE_YOUNG:
     2026-04-01: 528.34
   metadata:
     label: Universal Credit couple amount (both under 25)
-    uprating: gov.benefit_uprating_cpi
+    uprating: gov.dwp.universal_credit.standard_allowance.uprating
     unit: currency-GBP
     period: month
 COUPLE_OLD:
@@ -93,7 +93,7 @@ COUPLE_OLD:
     period: month
 metadata:
   unit: currency-GBP
-  uprating: gov.benefit_uprating_cpi
+  uprating: gov.dwp.universal_credit.standard_allowance.uprating
   propagate_metadata_to_children: true
   reference:
     - title: Benefit and pension rates 2020 to 2021 (DWP, gov.uk)
@@ -111,3 +111,5 @@ metadata:
     # As-of date.
     - https://www.legislation.gov.uk/uksi/2013/376/regulation/1
     - https://www.gov.uk/universal-credit/what-youll-get
+    # Uprating from 2027-28: CPI and the uplifts to 2029-30.
+    - https://www.legislation.gov.uk/ukpga/2025/22/section/1

policyengine_uk/scenarios/uc_reform.py

@@ -158,8 +158,9 @@ def add_universal_credit_reform(sim: Microsimulation):
         )  # Monthly amount * 12
         sim.set_input("uc_LCWRA_element", year, current_health_element)
 
-    # Standard allowance uplift is handled in the formula itself so user
-    # reforms to the base amount are applied before the uplift.
+    # The standard allowance uplift is applied through the allowance's
+    # uprating index (rebalancing/create_standard_allowance_uprating.py), so a
+    # reform to the amount itself is used as given.
 
 
 universal_credit_july_2025_reform = Scenario(

policyengine_uk/tax_benefit_system.py

@@ -21,6 +21,9 @@
 from policyengine_uk.parameters.gov.dwp.state_pension.triple_lock.create_triple_lock import (
     add_triple_lock,
 )
+from policyengine_uk.parameters.gov.dwp.universal_credit.rebalancing.create_standard_allowance_uprating import (
+    add_uc_standard_allowance_uprating,
+)
 from policyengine_uk.parameters.gov.economic_assumptions.create_september_cpi_uprating import (
     add_september_cpi_uprating,
 )
@@ -100,6 +103,7 @@ def process_parameters(self) -> None:
         - September CPI uprating
         - Economic assumption indices
         - Income tax and NICs threshold indexation after the freeze
+        - Universal Credit standard allowance uprating (UC Act 2025 s. 1)
         - Parameter uprating and backdating
         - Conversion to fiscal year parameters
         """
@@ -113,6 +117,7 @@ def process_parameters(self) -> None:
         self.parameters = add_september_cpi_uprating(self.parameters)
         self.parameters = create_economic_assumption_indices(self.parameters)
         self.parameters = add_threshold_indexation(self.parameters)
+        self.parameters = add_uc_standard_allowance_uprating(self.parameters)
         self.parameters = add_lsr_deprecation_aliases(self.parameters)
 
         # Create baseline parameters for reform comparisons

policyengine_uk/tests/test_dwp_published_rates.py

@@ -17,10 +17,11 @@
 3. Projections continue from the last published rate: for a series published
    through 2026-27, an uprated parameter in 2027-28 equals the 2026-27 rate
    times the change in its uprating index, so there is no jump when
-   projections begin. The UC standard allowances and LCWRA element are left
-   out: the Universal Credit Act 2025 sets a minimum for the standard
-   allowance above CPI uprating (s.1) and freezes the LCWRA element (s.3) for
-   2026-27 to 2029-30, which the model does not yet follow.
+   projections begin. The UC standard allowances are uprated by their own
+   index, CPI times the change in the Universal Credit Act 2025 s.1 uplift,
+   and are checked against it like any other series. The LCWRA element is
+   left out: s.3 freezes it for 2026-27 to 2029-30, which the model does not
+   yet follow.
 4. Housing Benefit non-dependant deductions: each year's bands and deductions
    are the published ones, and the scale, read with lower edges inclusive as
    reg 74(2) words them ("not less than"), never falls as income rises.
@@ -73,14 +74,10 @@ def test_no_start_instant_overrides_published_rates(name):
     assert not (isinstance(uprating, dict) and "start_instant" in uprating)
 
 
-# Universal Credit Act 2025 (ukpga/2025/22) s.1 (standard allowance minimum:
-# the previous Step 2 amount, increased by CPI and then by the uplift in its
-# table) and s.3 (LCWRA element frozen for 2026-27 to 2029-30).
+# Universal Credit Act 2025 (ukpga/2025/22) s.3: the LCWRA element is frozen
+# for 2026-27 to 2029-30. The standard allowances follow s.1 through their own
+# uprating index, so they are not exceptions.
 UC_ACT_2025_EXCEPTIONS = {
-    "gov.dwp.universal_credit.standard_allowance.amount.SINGLE_YOUNG",
-    "gov.dwp.universal_credit.standard_allowance.amount.SINGLE_OLD",
-    "gov.dwp.universal_credit.standard_allowance.amount.COUPLE_YOUNG",
-    "gov.dwp.universal_credit.standard_allowance.amount.COUPLE_OLD",
     "gov.dwp.universal_credit.elements.disabled.amount",
 }
 
@@ -96,7 +93,7 @@ def test_projection_continues_from_last_published_rate(name):
     if last < 2026:
         pytest.skip("series ends before 2026-27")
     if name in UC_ACT_2025_EXCEPTIONS:
-        pytest.skip("Universal Credit Act 2025 ss.1 and 3 depart from CPI uprating")
+        pytest.skip("Universal Credit Act 2025 s.3 departs from CPI uprating")
     index = node(uprating if isinstance(uprating, str) else uprating["parameter"])
     ratio = index(f"{last + 1}-01-01") / index(f"{last}-01-01")
     expected = PARAMETERS[name]["values"][last] * ratio