diff --git a/changelog.d/602-budget-contract.added.md b/changelog.d/602-budget-contract.added.md new file mode 100644 index 00000000..cf080fed --- /dev/null +++ b/changelog.d/602-budget-contract.added.md @@ -0,0 +1 @@ +Updated the UK Budget reform contract to version 1.1.0. Its rate-blending case, `mid_year_blended_rate`, now holds capital gains realisations fixed (both elasticity conventions zero and no separate Business Asset Disposal Relief elasticity), so its static expected values hold whatever realisation response policyengine-uk applies by default. Added `cgt_retention_response`, which checks the response itself: with a retention-rate elasticity of 1, a 20% basic rate from 6 April 2027 scales realised gains by (1 - 20%) / (1 - 18%) on every route. Added `cgt_default_response`, the same reform with no response settings, so the report shows the default response policyengine-uk applies; its checks expect the retention-rate elasticity of 1 that policyengine-uk#2396 makes the default, and report as pending (without gating) until policyengine.py pins that release. Each case also checks that all three response settings reached the model. `capital_gains_response()` builds a case's elasticity changes. diff --git a/changelog.d/release-lock-markers.fixed.md b/changelog.d/release-lock-markers.fixed.md new file mode 100644 index 00000000..c14dec3c --- /dev/null +++ b/changelog.d/release-lock-markers.fixed.md @@ -0,0 +1 @@ +Re-locked `uv.lock` with the pinned uv 0.12.14. Two dependency markers written by another uv version made the release's version bump rewrite the lock, which the reviewed-lock check rejects, so no release has published since #571. diff --git a/src/policyengine/tax_benefit_models/uk/budget_reform_contract.py b/src/policyengine/tax_benefit_models/uk/budget_reform_contract.py index d64bfe24..8f14c956 100644 --- a/src/policyengine/tax_benefit_models/uk/budget_reform_contract.py +++ b/src/policyengine/tax_benefit_models/uk/budget_reform_contract.py @@ -47,12 +47,28 @@ Prior law after a bounded change -------------------------------- -Contract 1.0.0 expects prior law's projected path to resume after a bounded -change (``PRIOR_LAW_OPTION = "projected"``). Whether indexation should +The contract expects prior law's projected path to resume after a bounded +change (``PRIOR_LAW_OPTION = "projected"``, since contract 1.0.0). Whether indexation should instead resume from a changed statutory amount (Income Tax Act 2007 s57 indexes "the amount ... for the previous tax year") is an open methodology call (cos d1344). Checks that depend on it carry ``pending`` and never gate. +Behavioural responses +--------------------- + +A case about statutory arithmetic holds capital gains realisations fixed: it +sets both elasticity conventions to zero and the separate Business Asset +Disposal Relief elasticity off (:func:`capital_gains_response` with an +elasticity of 0), so its expected values hold whatever response +policyengine-uk applies by default. A case about the response sets its +elasticity, and expects realised gains scaled by +``((1 - t1) / (1 - t0)) ** elasticity``, where ``t0`` and ``t1`` are the +marginal rates on the gains without and with the reform. Contract 1.1.0 +added both, and a case with no response settings that shows the default +response policyengine-uk applies. Its checks expect the retention-rate +elasticity of 1 that policyengine-uk#2396 makes the default, and carry +``pending`` until policyengine.py pins a release with it. + Report ------ @@ -90,14 +106,17 @@ import sys import traceback from collections.abc import Callable, Mapping, Sequence -from dataclasses import dataclass, field +from dataclasses import dataclass, field, replace from decimal import ROUND_CEILING, Decimal from typing import Any, Optional, Union CONTRACT_ID = "policyengine-uk/budget-reform-contract" -CONTRACT_VERSION = "1.0.0" +CONTRACT_VERSION = "1.1.0" PRIOR_LAW_OPTION = "projected" PRIOR_LAW_DECISION = "d1344" +# The capital gains response default: policyengine-uk#2396 makes it a +# retention-rate elasticity of 1. Its checks gate once policyengine.py pins it. +DEFAULT_RESPONSE_DECISION = "policyengine-uk#2396" FLAT_STOP = datetime.date(2100, 12, 31) COUNTRY_ROUTES = ( @@ -132,6 +151,10 @@ NEW_STATE_PENSION = "gov.dwp.state_pension.new_state_pension.amount" CGT_BASIC_RATE = "gov.hmrc.cgt.basic_rate" CGT_ANNUAL_EXEMPT_AMOUNT = "gov.hmrc.cgt.annual_exempt_amount" +CGT_RESPONSES = "gov.simulation.capital_gains_responses" +CGT_ELASTICITY = f"{CGT_RESPONSES}.elasticity" +CGT_MTR_ELASTICITY = f"{CGT_RESPONSES}.mtr_elasticity" +CGT_SEPARATE_BADR_ELASTICITY = f"{CGT_RESPONSES}.separate_badr_elasticity" VAT_STANDARD_RATE = "gov.hmrc.vat.standard_rate" VAT_COVERAGE = "gov.simulation.microdata_vat_coverage" PROTECTED_LCWRA = "gov.dwp.universal_credit.rebalancing.protected_health_element" @@ -342,8 +365,83 @@ def expected(context: Context) -> float: GAINS_UPLIFT_ORACLE = ( "(£10,000 of gains - the annual exempt amount) x (20% - current rate) x " - "the share of the tax year at 20%; the gains sit wholly in the basic rate " - "band, and the exempt amount and current rate are read from current law" + "the share of the tax year at 20%, with realisations held fixed; the " + "gains sit wholly in the basic rate band, and the exempt amount and " + "current rate are read from current law" +) + + +def capital_gains_response( + start: datetime.date, elasticity: float = 0.0 +) -> tuple[Change, ...]: + """Changes fixing the capital gains realisation response from ``start`` on. + + A retention-rate elasticity of ``elasticity``, no marginal tax rate + elasticity and no separate Business Asset Disposal Relief elasticity, so + every gain responds with ``elasticity``. An elasticity of 0 holds + realisations fixed, whatever response the model applies by default. + """ + return ( + Change(CGT_ELASTICITY, start, elasticity), + Change(CGT_MTR_ELASTICITY, start, 0.0), + Change(CGT_SEPARATE_BADR_ELASTICITY, start, False), + ) + + +def _response_settings_checks( + year: int, elasticity: float, oracle: str +) -> tuple[Check, ...]: + """Checks that each response setting reached the built system: the + retention-rate elasticity, no marginal tax rate elasticity, and the + separate relief elasticity off (a switch reads as 0 when off).""" + return ( + Check("parameter", CGT_ELASTICITY, year, elasticity, oracle), + Check("parameter", CGT_MTR_ELASTICITY, year, 0.0, oracle), + Check("parameter", CGT_SEPARATE_BADR_ELASTICITY, year, 0.0, oracle), + ) + + +def _realised_gains( + year: int, rate: float, elasticity: float +) -> Callable[[Context], float]: + """Gains after the realisation response to a basic rate of ``rate``. + + The gains sit wholly in the basic rate band, so the marginal rates on + them without and with the reform are the two basic rates. + """ + + def expected(context: Context) -> float: + current = context.baseline(CGT_BASIC_RATE, year) + return GAINS * ((1 - rate) / (1 - current)) ** elasticity + + return expected + + +def _gains_response_uplift( + year: int, rate: float, elasticity: float +) -> Callable[[Context], float]: + """Extra CGT at a basic rate of ``rate`` all year, after the response.""" + + def expected(context: Context) -> float: + exempt = context.baseline(CGT_ANNUAL_EXEMPT_AMOUNT, year) + current = context.baseline(CGT_BASIC_RATE, year) + realised = _realised_gains(year, rate, elasticity)(context) + return (realised - exempt) * rate - (GAINS - exempt) * current + + return expected + + +REALISED_GAINS_ORACLE = ( + "£10,000 of gains x ((1 - 20%) / (1 - current rate)) to the power of the " + "elasticity: the gains sit wholly in the basic rate band, so the marginal " + "rates on them are the basic rates; the current rate is read from " + "current law" +) + +GAINS_RESPONSE_UPLIFT_ORACLE = ( + "(realised gains - the annual exempt amount) x 20% - (£10,000 of gains - " + "the annual exempt amount) x current rate, with the realised gains above; " + "the exempt amount and current rate are read from current law" ) DIVIDENDS = 10_000 @@ -543,7 +641,7 @@ def expected(context: Context) -> float: PERSONAL_ALLOWANCE, 2034, _baseline_value(PERSONAL_ALLOWANCE, 2034), - "contract 1.0.0: prior law's projected path resumes", + "prior law's projected path resumes (PRIOR_LAW_OPTION)", ), Check( "parameter", @@ -663,8 +761,13 @@ def expected(context: Context) -> float: ), Case( id="mid_year_blended_rate", - title="CGT basic rate 20% from 30 October 2027", - changes=(Change(CGT_BASIC_RATE, _date("2027-10-30"), 0.20),), + title="CGT basic rate 20% from 30 October 2027, realisations held fixed", + changes=( + Change(CGT_BASIC_RATE, _date("2027-10-30"), 0.20), + # The case checks the blending of the rate, so the realisation + # response is off. + *capital_gains_response(_date("2025-01-01")), + ), # £20,000 of earnings and £10,000 of gains: the taxable gains sit # wholly in the basic rate band. household=adult(20_000, capital_gains=GAINS), @@ -681,6 +784,7 @@ def expected(context: Context) -> float: ), Check("parameter", CGT_BASIC_RATE, 2028, 0.20, "in force all year"), Check("parameter", CGT_BASIC_RATE, 2026, 0.18, "before the change"), + *_response_settings_checks(2027, 0.0, "set by the case"), Check("change", "capital_gains_tax", 2026, 0.0, "before the change", 0.005), Check( "change", @@ -700,6 +804,83 @@ def expected(context: Context) -> float: ), ), ), + Case( + id="cgt_retention_response", + title=( + "CGT basic rate 20% from 6 April 2027, with a retention-rate " + "elasticity of 1" + ), + changes=( + Change(CGT_BASIC_RATE, _date("2027-04-06"), 0.20), + *capital_gains_response(_date("2025-01-01"), elasticity=1.0), + ), + # As above, the gains sit wholly in the basic rate band, before and + # after the response. + household=adult(20_000, capital_gains=GAINS), + checks=( + Check("parameter", CGT_BASIC_RATE, 2027, 0.20, "in force all year"), + *_response_settings_checks(2027, 1.0, "set by the case"), + Check("change", "capital_gains_tax", 2026, 0.0, "before the change", 0.005), + Check( + "variable", + "capital_gains", + 2026, + float(GAINS), + "no rate change before 2027-28, so no response", + 0.01, + ), + Check( + "variable", + "capital_gains", + 2027, + _realised_gains(2027, 0.20, 1.0), + REALISED_GAINS_ORACLE, + 0.01, + ), + Check( + "change", + "capital_gains_tax", + 2027, + _gains_response_uplift(2027, 0.20, 1.0), + GAINS_RESPONSE_UPLIFT_ORACLE, + 0.005, + ), + ), + ), + Case( + id="cgt_default_response", + title=( + "CGT basic rate 20% from 6 April 2027, at policyengine-uk's " + "default response" + ), + # No response settings, so the report shows the default. The expected + # values are cgt_retention_response's, the default policyengine-uk#2396 + # sets; they report without gating until policyengine.py pins it. + changes=(Change(CGT_BASIC_RATE, _date("2027-04-06"), 0.20),), + household=adult(20_000, capital_gains=GAINS), + checks=tuple( + replace(check, pending=DEFAULT_RESPONSE_DECISION) + for check in ( + *_response_settings_checks(2027, 1.0, "policyengine-uk's default"), + Check( + "variable", + "capital_gains", + 2027, + _realised_gains(2027, 0.20, 1.0), + REALISED_GAINS_ORACLE + ", at the default elasticity of 1", + 0.01, + ), + Check( + "change", + "capital_gains_tax", + 2027, + _gains_response_uplift(2027, 0.20, 1.0), + GAINS_RESPONSE_UPLIFT_ORACLE + ", at the default elasticity of 1", + 0.005, + ), + ) + ), + ), Case( id="september_cpi_moves_indexed_thresholds", title="A 5% September 2030 CPI rise indexes the 2031-32 thresholds", @@ -1817,7 +1998,8 @@ def _sampled_change(rng: random.Random) -> Change: def expected_annual( change: Change, year: int, baseline: Callable[[str, int], float] ) -> float: - """The annual value a single change gives, under contract 1.0.0. + """The annual value a single change gives, under the contract's prior-law + option (``PRIOR_LAW_OPTION``). Prior law is current law's annual value outside the change. 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"route": "api.sim_api", "status": "unsupported", "variant": "tolerance_boundary"}, {"actual": null, "case_id": "missing_value", "check": "variable:income_tax:2027", "decision_id": null, "expected": null, "holds": null, "route": "country.reform_dict", "status": "error", "variant": "missing_value"}, {"actual": null, "case_id": "missing_value", "check": "variable:income_tax:2027", "decision_id": null, "expected": null, "holds": null, "route": "country.scenario_parameter_changes", "status": "error", "variant": "missing_value"}, {"actual": null, "case_id": "missing_value", "check": "variable:income_tax:2027", "decision_id": null, "expected": null, "holds": null, "route": "country.reform_from_dict", "status": "error", "variant": "missing_value"}, {"actual": null, "case_id": "missing_value", "check": "variable:income_tax:2027", "decision_id": null, "expected": null, "holds": null, "route": "wrapper.household", "status": "error", "variant": "missing_value"}, {"actual": null, "case_id": "missing_value", "check": "variable:income_tax:2027", "decision_id": null, "expected": null, "holds": null, "route": "wrapper.policy", "status": "error", "variant": "missing_value"}, {"actual": null, "case_id": "missing_value", "check": null, "decision_id": null, "expected": null, "holds": null, "route": "api.sim_api", "status": "unsupported", "variant": "missing_value"}, {"actual": 1000.0, "case_id": "matching_pending", "check": "variable:income_tax:2027", "decision_id": "d1344", "expected": 1000.0, "holds": true, "route": "country.reform_dict", "status": "pending", "variant": "matching_pending"}, {"actual": 1000.0, "case_id": "matching_pending", "check": "variable:income_tax:2027", "decision_id": "d1344", "expected": 1000.0, "holds": true, "route": "country.scenario_parameter_changes", "status": "pending", "variant": "matching_pending"}, {"actual": 1000.0, "case_id": "matching_pending", "check": "variable:income_tax:2027", "decision_id": "d1344", "expected": 1000.0, "holds": true, "route": "country.reform_from_dict", "status": "pending", "variant": "matching_pending"}, {"actual": 1000.0, "case_id": "matching_pending", "check": "variable:income_tax:2027", "decision_id": "d1344", "expected": 1000.0, "holds": true, "route": "wrapper.household", "status": "pending", "variant": "matching_pending"}, {"actual": 1000.0, "case_id": "matching_pending", "check": "variable:income_tax:2027", "decision_id": "d1344", "expected": 1000.0, "holds": true, "route": "wrapper.policy", "status": "pending", "variant": "matching_pending"}, {"actual": null, "case_id": "matching_pending", "check": null, "decision_id": null, "expected": null, "holds": null, "route": "api.sim_api", "status": "unsupported", "variant": "matching_pending"}, {"actual": "ValueError: no new_credit here", "case_id": "matching_rejection", "check": "rejected", "decision_id": null, "expected": "an error matching 'new_credit'", "holds": null, "route": "country.reform_dict", "status": "pass", "variant": "matching_rejection"}, {"actual": "ValueError: no new_credit here", "case_id": "matching_rejection", "check": "rejected", "decision_id": null, "expected": "an error matching 'new_credit'", "holds": null, "route": "country.scenario_parameter_changes", "status": "pass", "variant": "matching_rejection"}, {"actual": "ValueError: no new_credit here", "case_id": "matching_rejection", "check": "rejected", "decision_id": null, "expected": "an error matching 'new_credit'", "holds": null, "route": "country.reform_from_dict", "status": "pass", "variant": "matching_rejection"}, {"actual": "ValueError: no new_credit here", "case_id": "matching_rejection", "check": "rejected", "decision_id": null, "expected": "an error matching 'new_credit'", "holds": null, "route": "wrapper.household", "status": "pass", "variant": "matching_rejection"}, {"actual": "ValueError: no new_credit here", "case_id": "matching_rejection", "check": "rejected", "decision_id": null, "expected": "an error matching 'new_credit'", "holds": null, "route": "wrapper.policy", "status": "pass", "variant": "matching_rejection"}, {"actual": null, "case_id": "matching_rejection", "check": null, "decision_id": null, "expected": null, "holds": null, "route": "api.sim_api", "status": "unsupported", "variant": "matching_rejection"}] diff --git a/tests/test_uk_budget_reform_contract.py b/tests/test_uk_budget_reform_contract.py index 74b21a59..7f13d280 100644 --- a/tests/test_uk_budget_reform_contract.py +++ b/tests/test_uk_budget_reform_contract.py @@ -68,6 +68,25 @@ def test_fiscal_year_average_is_day_weighted(): assert fiscal_year_average(pieces, 2028) == pytest.approx(0.20) +def test_the_response_oracle_is_the_static_one_at_an_elasticity_of_zero(): + current_law = { + contract.CGT_ANNUAL_EXEMPT_AMOUNT: 3_000.0, + contract.CGT_BASIC_RATE: 0.18, + } + context = contract.Context(lambda path, year: current_law[path]) + # (£10,000 - £3,000) x (20% - 18%). + assert contract._gains_uplift(2027, 1.0)(context) == pytest.approx(140.0) + assert contract._gains_response_uplift(2027, 0.20, 0.0)(context) == ( + pytest.approx(140.0) + ) + # At an elasticity of 1 the gains scale by (1 - 20%) / (1 - 18%). + realised = 10_000 * 0.8 / 0.82 + assert contract._realised_gains(2027, 0.20, 1.0)(context) == pytest.approx(realised) + assert contract._gains_response_uplift(2027, 0.20, 1.0)(context) == ( + pytest.approx((realised - 3_000) * 0.20 - 7_000 * 0.18) + ) + + def test_expected_annual_for_a_single_change(): def baseline(path, year): return 0.20 @@ -101,6 +120,18 @@ def test_representations(): } +def test_the_rate_blending_case_holds_realisations_fixed_on_every_route(): + case = next(case for case in CASES if case.id == "mid_year_blended_rate") + static = { + contract.CGT_ELASTICITY: [0.0], + contract.CGT_MTR_ELASTICITY: [0.0], + contract.CGT_SEPARATE_BADR_ELASTICITY: [False], + } + for route in contract.COUNTRY_ROUTES + contract.WRAPPER_ROUTES: + reform = contract.represent(case, route) + assert {path: list(reform[path].values()) for path in static} == static + + def test_case_ids_are_unique_and_every_check_has_an_oracle(): ids = [case.id for case in CASES] assert len(ids) == len(set(ids)) @@ -508,6 +539,54 @@ def test_the_april_rate_case_holds_on_the_country_routes(): ) +def test_the_capital_gains_cases_hold_on_every_in_process_route(): + pytest.importorskip("policyengine_uk.utils.dated_reforms") + routes = contract.COUNTRY_ROUTES + contract.WRAPPER_ROUTES + report = run_budget_reform_contract( + routes=list(routes), + cases=["mid_year_blended_rate", "cgt_retention_response"], + max_examples=0, + ) + failures = [row for row in report["cases"] if row["status"] in ("fail", "error")] + assert failures == [] + # The response is checked, and passes, on every route. + passed = { + row["route"] + for row in report["cases"] + if row["case_id"] == "cgt_retention_response" + and row["check"] == "change:capital_gains_tax:2027" + and row["status"] == "pass" + } + assert passed == set(routes) + + +def test_the_default_response_is_reported_without_gating(): + """The default case's checks all wait on policyengine-uk#2396, so it + reports the default response on every route without failing a run. The + golden rows cover its rows on every route under fake routes; one real + route checks that it runs and reports pending there.""" + pytest.importorskip("policyengine_uk.utils.dated_reforms") + case = next(case for case in CASES if case.id == "cgt_default_response") + assert {check.pending for check in case.checks} == { + contract.DEFAULT_RESPONSE_DECISION + } + # No response settings: the case runs on whatever default is installed. + assert not any(change.path.startswith("gov.simulation.") for change in case.changes) + + report = run_budget_reform_contract( + routes=["country.reform_dict"], + cases=["cgt_default_response"], + max_examples=0, + ) + rows = [row for row in report["cases"] if row["case_id"] == case.id] + assert {row["status"] for row in rows} <= {"pass", "pending"} + (response,) = ( + row for row in rows if row["check"] == "change:capital_gains_tax:2027" + ) + assert response["status"] == "pending" + assert response["decision_id"] == contract.DEFAULT_RESPONSE_DECISION + + def test_a_parameter_modifier_writes_the_annualised_parameters(): from policyengine_uk import Simulation diff --git a/uv.lock b/uv.lock index c9a8c36e..aaa3a7a5 100644 --- a/uv.lock +++ b/uv.lock @@ -197,7 +197,7 @@ name = "cffi" version = "2.0.0" source = { registry = "https://pypi.org/simple" } dependencies = [ - { name = "pycparser", marker = "implementation_name != 'PyPy'" }, + { name = "pycparser" }, ] sdist = { url = "https://files.pythonhosted.org/packages/eb/56/b1ba7935a17738ae8453301356628e8147c79dbb825bcbc73dc7401f9846/cffi-2.0.0.tar.gz", hash = "sha256:44d1b5909021139fe36001ae048dbdde8214afa20200eda0f64c068cac5d5529", size = 523588, upload-time = "2025-09-08T23:24:04.541Z" } wheels = [ @@ -1767,7 +1767,7 @@ name = "pexpect" version = "4.9.0" source = { registry = "https://pypi.org/simple" } dependencies = [ - { name = "ptyprocess", marker = "sys_platform != 'emscripten' and sys_platform != 'win32'" }, + { name = "ptyprocess" }, ] sdist = { url = "https://files.pythonhosted.org/packages/42/92/cc564bf6381ff43ce1f4d06852fc19a2f11d180f23dc32d9588bee2f149d/pexpect-4.9.0.tar.gz", hash = "sha256:ee7d41123f3c9911050ea2c2dac107568dc43b2d3b0c7557a33212c398ead30f", size = 166450, upload-time = "2023-11-25T09:07:26.339Z" } wheels = [