An Introduction to Microsimulation Tax-Benefit Models

You are the finance Secretary: Task 1: A War On Poverty

The Government of Unicoria has plegded to reduce the headcount measure of poverty by 10 percentage points. Your task is to design a policy package that delivers this in the most effective way possible. The economy is doing well, and net extra spending of up to £4 billion has been agreed.

Things to consider include:

• cost any costs above £4bn will have to be raised from somewhere;
• targetting vs. incentives: well targetted benefit increases may force poor people into poverty traps, whilst more widely spread increases may require tax increases to keep within budget;
• alternative measures of poverty have you cheated at all, and reduced poverty headcounts by concentrating on the near-poor, perhaps through increasing in-work benefits? (You may need to do this in order to meet the political objectives)

Once you’ve designed your scheme writing short briefings or newspaper articles on it from the perspectives of two of the roles you’ve just read about.