The Fiscal Model
Every number is based on OBR 2025–26 baseline data. Move the sliders. Try to break it. If the numbers don't add up, tell us on the Challenge page.
This is a policy model, not a Treasury forecast. The assumptions are visible, the sliders are adjustable, and the public can test the trade-offs.
Assumptions (visible before the model loads)
| Lever | Source / basis | Range used |
|---|---|---|
| Baseline deficit | OBR March 2025 forecast | £87bn central |
| VAT elasticity | HMRC published elasticities, 2024 | −0.4 to −0.6 (conservative end used) |
| Income tax wage multiplier | HMRC / IFS distributional analysis | 0.7× to 1.0× |
| Utilico / Transitco savings | NAO procurement waste estimates; rail / energy operator margins | £14–22bn / year by Year 5 |
| Outsourcing reduction trajectory | NAO 2024 outsourcing review | 40% reduction by Year 4, 70% by Year 8 |
| Nuclear capex treatment | DESNZ levelised cost; capex amortised over reactor life | £6.2bn / year average through Year 10 |
| Carer reform cost | DWP carer's allowance + threshold modelling | £11bn / year at full rollout |
| Dental visa scheme cost | NHS England commissioning rates + visa admin | £1.4bn / year |
| Confidence intervals | Low / central / high scenarios visible in model | ±18% on net deficit impact |
All figures are illustrative and updated as ONS / OBR / HMRC publish revised baselines. The methodology section below explains the elasticity logic.
Methodology
The model takes the Office for Budget Responsibility's March 2025 forecast as the starting line. Each lever — income tax, VAT, minimum wage, carer pay, nuclear capacity, transport investment, efficiency savings, defence — maps to a published HMRC, ONS, or DESNZ elasticity. Where elasticities are contested, the model uses the conservative end of the published range.
The NRSA column is a costed projection. The delta column shows the difference. Negative deltas (green) reduce spend or borrowing. Positive deltas (red) increase it. The total deficit line is the only number that matters to the bond market.
The model is illustrative, not predictive. It exists to show that the trade-offs are intelligible — and that the answers add up. The Red Book (read in full) is the canonical fiscal document.