PolicyEngine Macro

model 01 — OBR macroeconometric model · obr-macro · UK · hosted

UK fiscal reform, quarter by quarter.

Run selected UK tax and spending scenarios and trace GDP, consumption, and investment over 3–5 years against the March 2026 EFO baseline. Borrowing is not yet returned by the PolicyEngine Macro adapter.

how far to trust it

Excellent anchored. Weak free-running. Both published.

Three configurations, three very different levels of trust — errors are MAPE (mean absolute percentage error) against the published EFO path.

anchored — real GDP 0.15% MAPE vs published EFO; CI fails at 1%
anchored — consumption 0.25% MAPE vs published EFO; CI fails at 1%
held-add-factor forecast 0.37% MAPE real GDP, 2026Q1–2027Q4; 6 of 8 computed in band
free-running 5.75% MAPE real GDP; 4 of 11 computed in band — report-only
The three emulator configurations and how each one scores
configurationwhat it ishow it scores
Anchored Add-factors on, matched to the March 2026 EFO. The configuration every reform score uses. GDP 0.15% MAPE, consumption 0.25% over 2025Q1–2027Q4; horizon extends to 2031Q1, where GDP is reproduced to 0.29% (anchored unemployment unreliable beyond 2027Q4). Hard-gated in CI, with finiteness, a 0.5%-of-GDP expenditure-identity check, and structural sign invariants.
Held add-factors Add-factors fitted 2024Q1–2025Q4, held flat, projected to 2027Q4. Scored over 2026Q1–2027Q4 on the March 2026 baseline (caveats in the notes below). GDP 0.37%, consumption 0.33%; 6 of 8 computed variables within band. (The working paper's November-2025-vintage scorecard, over its own longer window, reports GDP 2.2% and consumption 3.6%.)
Free-running De-seeded, add-factors off. The raw structural dynamics with no OBR judgement. Weak, and reported as such. GDP 5.75%, consumption 9.56%, household income 14.15%, business investment 16.12%, company profits 79.80%. The model contracts 1–2%/yr while the EFO grows.

in band rates within 1.0pp · net balances within 1.5% of GDP · levels within 10% MAPE.

note anchored accuracy is a by-construction invariant, not a forecast claim: add-factors absorb the tracking error; CI hard-fails if it slips.

caveat the held-add-factor forecast is initialised at the EFO values it is scored against.

caveat its add-factor base window includes OBR-forecast (not outturn) quarters, so held add-factors partly encode "agree with the OBR".

more full scorecards in the working paper; the charts below regenerate from its committed data.

An independent implementation built from the OBR's published model code and forecast data — not produced, maintained, or endorsed by the Office for Budget Responsibility. Its results should not be presented as official OBR estimates.

evidence — anchored

Against the OBR's own forecast, and HMRC's reckoner.

The chart below shows the anchored tracking error quarter by quarter (headline MAPEs are in the strip and table above); because anchoring is by construction, the independent HMRC costing further down is the stronger test.

obr-macro: anchored baseline vs March 2026 EFO, quarterly deviation Line chart. Quarterly percentage deviation of the anchored emulator from the published March 2026 EFO, 2025Q1 to 2027Q4. Real GDP ranges from -0.16% to +0.28% (mean absolute deviation 0.15%); consumption from -0.27% to +0.46% (mean absolute deviation 0.25%). Both series stay well inside the plus or minus 1% band at which continuous integration hard-fails the build, which is off the top and bottom of this frame. real GDP (peak +0.28%) consumption (peak +0.46%) -0.6% -0.3% 0 +0.3% +0.6% 2025Q1 2026Q1 2027Q1 2027Q4
Current March 2026 EFO baseline. CI hard-fails at ±1.00% — off the top and bottom of this frame. MAPE: 0.15% for GDP and 0.25% for consumption over 2025Q1–2027Q4. Computed from papers/obr-macro/figures/fig_anchored_data.csv, regenerated from the March 2026 detailed forecast tables on 21 July 2026.

The independent check: a 1pp basic-rate rise from April 2026 scores £6.46bn in 2026–27 via the PolicyEngine static-costing bridge, against HMRC's £6.9bn (−6.4%), inside the £6–8bn range of recent vintages. The gap widens later (−15.6% by 2028–29), where HMRC's figures embed administrative-data fiscal drag that survey microdata capture less fully.

obr-macro: 1p on the basic rate, ours vs HMRC ready reckoner (£bn/yr) Grouped bar chart in billions of pounds per year. PolicyEngine's static costing of a 1 percentage point rise in the UK basic rate of income tax, against HMRC's Direct effects of illustrative tax changes ready reckoner, June 2025 vintage. For the basic rate +1pp, 2026–27 group, ours is 6.46 against HMRC’s 6.90, a deviation of -6.4%. For the basic rate +1pp, 2028–29 group, ours is 6.92 against HMRC’s 8.20, a deviation of -15.6%. The 2028–29 emulator figure is interpolated between the scored endpoints £6.46bn in 2026 and £7.38bn in 2030. 0 2 4 6 8 10 6.46 ours 6.90 HMRC basic rate +1pp, 2026–27 6.92 ours 8.20 HMRC basic rate +1pp, 2028–29
£bn/yr. 2028–29 emulator figure interpolated between scored endpoints (£6.46bn 2026, £7.38bn 2030). PolicyEngine's static costing of a 1pp basic-rate rise against HMRC's Direct effects of illustrative tax changes (June 2025 vintage). Source: obr-macro working paper, comparison table panel B.
obr-macro against the current March 2026 OBR EFO and HMRC's ready reckoner
OursOfficialDeviation
Anchored levels vs EFO March 2026, £bn/qtr
Real GDP, 2025Q1703.8703.4+0.05%
Real GDP, 2027Q4730.6728.6+0.28%
Consumption, 2025Q1429.7429.3+0.09%
Consumption, 2027Q4445.5443.4+0.46%
Basic rate +1pp vs HMRC ready reckoner, £bn/yr
2026–276.466.9−6.4%
2028–29 (interpolated)6.928.2−15.6%
2030 (end of window)7.38≈8.2−10.0%
How much of the OBR emulator scorecard the model actually computes Two stacked bars. Of 21 headline variables in the OBR emulator calibration scorecard, 11 are actually computed by the model and 10 are passthrough, held at the OBR published value and therefore scoring zero error trivially. Of the 11 computed, 3 are fair, 1 is an identity, 5 are poor, 2 are off. 4 of the 11, or 36 per cent, land within band, and one of those is a trivial accounting identity, so only 3 non-trivial computed variables are in band. The worst are company profits 79.80 per cent and the current account 4.17 per cent of GDP. 21 headline scorecard variables 11 computed 10 passthrough — held at the OBR value of which, the 11 the model computes fair 3 identity 1 poor 5 off 2 Only 3 of 11 non-trivial variables are in band. A fourth pass is an identity over passthrough inputs. bands: rates ±1.0pp · net balances ±1.5% of GDP · levels ≤10% MAPE
Raw calibration against the March 2026 EFO. Two “off” variables depend on unpublished OBR constants and are regression-gated rather than tuned. Source: docs/calibration_scorecard.md in the obr-macroeconomic-model repository.

The spending multiplier is ~1.0 by construction, against the OBR's own published 0.6. Under the demand closure a spending shock lands directly in the GDP identity and the behavioural second round is largely inactive, so a £5bn injection returns almost exactly £5bn of GDP — roughly a two-thirds overstatement of the impact multiplier, applying to every spending-side figure this page reports. It is the single most important number for anyone reading a policy score off this model.

Why, and what it biases → obr-macro overview.

The honest scorecard, outturns, and the March 2026 re-anchoring

The honest scorecard. The free-running row is the one that matters for anyone tempted to read the 0.15% as forecasting skill. The same equations that track the EFO to 0.15% when anchored miss it by 5.75% free-running — precisely the gap the OBR's own add-factor judgement closes in the official process, and the reason reform deltas are always scored against the anchored baseline rather than the raw one. The free-running score is de-seeded, with passthrough variables excluded, and is published report-only. Across the full scorecard only 4 of the 11 computed headline variables land within band (real GDP, consumption, the trade balance, and the trivial employment identity); of the full 21-line scorecard, 10 lines are passthroughs held at the OBR value. The worst line is company profits at 79.80% MAPE on the March baseline (54.57% on the paper's November vintage), which traces to a single unpublished constant in households' operating surplus OSHH — the paper documents and regression-gates it rather than re-tuning it, since tuning it would be fitting to the answer. Other lines that moved on re-anchoring, reported rather than smoothed: the free-running current account widened from 2.76 to 4.17% of GDP and is now over band; RPI improved from 2.03pp to 1.71pp; business investment worsened from 15.48% to 16.12%; the two household-income lines stand at 14.15% and 13.86%.

obr-macro: real GDP level, anchored vs free-running vs the March 2026 EFO (£bn/qtr) Line chart of quarterly real GDP levels in billions of pounds, 2025Q1 to 2027Q4. The published March 2026 EFO path rises from 703.4 to 728.6. The anchored emulator is visually indistinguishable from it, running from 703.8 to 730.6 (mean absolute deviation 0.15 per cent, recomputed here from the plotted series). The free-running emulator, de-seeded and with no add-factors, contracts from 691.0 to 663.1 — a gap that widens to 65 billion pounds, 5.75 per cent mean absolute deviation over the horizon. Free-running and EFO paths from papers/obr-macro/figures/fig_free_running_data.csv; anchored path from papers/obr-macro/figures/fig_anchored_data.csv. Coordinates: value v in billions maps to y = 292 - (v - 660) * 2.95 on a 660 to 740 axis; quarter i of 12 maps to x = 58 + i * 60.545. anchored (0.15% MAD) free-running (5.75% MAD) EFO Mar 2026 660 680 700 720 740 2025Q1 2026Q1 2027Q1 2027Q4
Current March 2026 EFO baseline. Real GDP, £bn/qtr, 2025Q1–2027Q4. The anchored path (0.15% MAPE) sits on top of the EFO; the same equations free-running — de-seeded, no add-factors — contract away from it (5.75% MAPE). Computed from papers/obr-macro/figures/fig_free_running_data.csv and fig_anchored_data.csv, regenerated on 21 July 2026.

Forecast versus outturn. Comparing one forecast vintage with another tests agreement, not accuracy. Against ONS outturns published since anchoring, quarter-on-quarter real GDP growth ran 0.1% in 2025Q2, 0.2% in Q3, 0.2% in Q4 and 0.6% in 2026Q1. The emulator's path (0.15, 0.14, 0.25, 0.37) tracks the three 2025 quarters to within 0.06 percentage points, but — like the November EFO it inherits (0.28, 0.20, 0.27, 0.39) — misses the strong 2026Q1 outturn by roughly a quarter of a point. Two caveats govern the reading: this is primarily a test of the OBR's November vintage, the emulator's own contribution being the 0.02–0.13 point gap between the two model rows; and ONS quarterly estimates are themselves revised, so the outturn is a moving target.

obr-macro: quarterly real GDP growth — emulator vs EFO Nov 2025 vs ONS outturn (% q/q) Grouped bar chart, percentage quarter-on-quarter real GDP growth for the four quarters with ONS outturns since anchoring. 2025Q2: emulator 0.15, EFO 0.28, ONS 0.1; 2025Q3: emulator 0.14, EFO 0.20, ONS 0.2; 2025Q4: emulator 0.25, EFO 0.27, ONS 0.2; 2026Q1: emulator 0.37, EFO 0.39, ONS 0.6. The emulator tracks the three 2025 outturns to within 0.06 points; both the emulator and the November EFO it inherits miss the strong 0.6 per cent 2026Q1 outturn by roughly a quarter of a point. Data from papers/obr-macro/figures/fig_outturn_data.csv. Coordinates: value v maps to y = 258 - v * 331.4 on a 0 to 0.7 axis. emulator EFO Nov 2025 ONS outturn 0 0.2 0.4 0.6 0.15 0.28 0.10 2025Q2 0.14 0.20 0.20 2025Q3 0.25 0.27 0.20 2025Q4 0.37 0.39 0.60 2026Q1
November 2025 EFO vintage — the working paper's study; the live baseline is anchored to the March 2026 EFO. % q/q real GDP growth. The emulator tracks the three 2025 outturns to within 0.06pp; both model rows miss the strong 2026Q1 outturn (0.6%) by roughly a quarter point. Computed from papers/obr-macro/figures/fig_outturn_data.csv; the table below carries the exact values.
Quarterly real GDP growth: emulator, EFO vintage, and ONS outturn
Real GDP, % q/qEmulatorEFO Nov 2025ONS outturn
2025Q20.150.280.1
2025Q30.140.200.2
2025Q40.250.270.2
2026Q10.370.390.6

Vintage: re-anchored to the March 2026 EFO. The hosted emulator has been re-anchored from the November 2025 EFO to the OBR's March 2026 forecast, and the headline numbers on this page are computed on that baseline: anchored GDP 0.15% MAPE, consumption 0.25% over 2025Q1–2027Q4, with the anchored horizon extended to 2031Q1 (GDP reproduced to 0.29% at 2031Q1; anchored unemployment is unreliable beyond 2027Q4, drifting to 0.9% against the EFO's 4.1% by 2031Q1). The headline and free-running charts use March 2026. Only the outturn backtest above retains November 2025, because changing its forecast vintage would erase the historical forecast being tested. The working paper opens with a dated current-vintage note. Reform effects are differences between structurally identical runs and are insensitive to modest baseline drift, which is why the re-anchoring leaves the £6.46bn/£7.38bn static costing untouched and moves the second-round GDP effect only from −0.057% to −0.058% by 2027Q4.

working paper (pdf) → obr-macro model page →

limits

Known limitations.

Known limits of the OBR emulator
limitdetail
Two household-income equations never fire The listing's only bare log() left-hand sides — log(HHTFA) and log(NDIVHH) — never execute: inputs MAJGDP and CORP are absent from the databank. The profits → dividends → household-income channel is inert: a 5pp corporation-tax rise moves FYCPR by −£1,780m; ΔNDIVHH is exactly zero. A parser fix landed, numerically inert; reviving the channel needs a CORP series — a calibration decision not yet made. All published figures have these channels inert.
Impact multiplier ~1 by construction ~1.0 vs the OBR's published 0.6 — the warning above explains why and what it biases.
Corporation-tax closure is specialised The investment closure runs the published TCPRO → cost-of-capital → investment chain via obr_shock: business-investment equation reconstructed from the OBR's commented, truncated line; level anchored with held add-factors; MSGVA, PIF, PIRHH frozen to a shared tracking path against uncalibrated feedback. CI hard-gates the expected sign and a £50bn-per-quarter bound. A controlled scenario closure, not a calibrated supply block.
Passthrough channels Exports, imports and CPI are exogenous here, held at the OBR value. They score 0.00% error without being behavioural wins — 10 of 21 scorecard lines are passthroughs, labelled as such.
Approximated add-factors Recent corrections are averaged and held flat. The OBR's judgemental, quarter-by-quarter add-factors are not reproduced.
Vintage October 2025 equation listing, March 2026 EFO, current-vintage ONS series. Where the ONS has revised history the identities don't close exactly; that slack lands in the add-factors. The working paper remains a November 2025 EFO vintage study.
No behavioural micro Aggregate equations only. Distributional questions belong to PolicyEngine.