Income projections inflated ~2.5x vs SPI targets (dividends, savings, property)

[MaxGhenis]

Summary

The incomes_projection.csv file shows income amounts significantly higher than the raw SPI targets in incomes.csv:

Income Type	SPI Target (2021)	Projection (2024)	Inflation Factor
Dividends	£71.6bn	£185.6bn	2.59x
Savings interest	£2.5bn	£6.4bn	2.55x
Property	£25.8bn	£66.5bn	2.58x

Key Finding: High Income Bands Are the Problem

From microcalibrate.vercel.app, the overestimation is concentrated in the highest income bands:

Income Band	Target	Estimate	Ratio
£500k-£1M	£5.8bn	£73bn	12.6x
£12,570+ (all)	£98bn	£170bn	1.7x

The £500k-£1M band alone shows estimates 12x higher than target. This is where much of the dividend income is concentrated, so this single band is driving much of the overall discrepancy.

Investigation

1. Raw SPI data is correct: The weighted SPI 2020-21 raw data shows:

   • Dividends: £62.8bn
   • Savings: £4.5bn
   • Property: £28.1bn

   These roughly match the incomes.csv targets.

2. Uprating is minimal: Uprating from 2021→2024 adds ~19% (factor of ~1.19), so dividends should be ~£85bn after uprating, not £186bn.

3. Issue is in create_income_projections(): The function in utils/incomes_projection.py:

   • Takes SPI 2020-21 dataset
   • Reweights using reweight()
   • Then calculates income for each year

   The reweighting step appears to dramatically inflate income amounts, especially for high-income households.

Impact

This causes PolicyEngine UK to:

• Overestimate dividend income by ~2.3x (£165bn vs £72bn target)
• Overestimate property income by ~1.4x (£36bn vs £26bn target)
• Overestimate savings interest by ~1.6x (£4.1bn vs £2.5bn target)

This affects revenue estimates for reforms targeting these income sources. For example, the November 2025 Budget dividend tax increase shows 2.4x higher revenue than OBR projections.

Related

This may be related to #217 (population calibration issues) as both suggest the calibration/reweighting process is inflating totals.

Discovered during

Analysis for policyengine-uk PR #1395 (November 2025 Budget income source tax rates)