Compute fuel duty from calibrated litres

MaxGhenis · MaxGhenis · commit 7e93d00a5308 · 2026-05-20T13:28:46.000-04:00
diff --git a/changelog.d/fuel-duty-litre-rate.md b/changelog.d/fuel-duty-litre-rate.md
@@ -0,0 +1 @@
+- Compute fuel duty directly as calibrated petrol and diesel litres multiplied by the statutory duty rate, with fuel-spending proxies uprated by road-fuel litres and pump prices.
diff --git a/policyengine_uk/data/uprating_indices.yaml b/policyengine_uk/data/uprating_indices.yaml
@@ -48,8 +48,9 @@ gov.economic_assumptions.yoy_growth.obr.consumer_price_index:
 - universal_credit_reported
 - winter_fuel_allowance_reported
 - working_tax_credit_reported
-gov.economic_assumptions.yoy_growth.obr.road_fuel_volume:
+gov.economic_assumptions.yoy_growth.obr.diesel_spending_litre_proxy:
 - diesel_spending
+gov.economic_assumptions.yoy_growth.obr.petrol_spending_litre_proxy:
 - petrol_spending
 gov.economic_assumptions.yoy_growth.obr.mortgage_interest:
 - mortgage_interest_repayment
diff --git a/policyengine_uk/parameters/gov/economic_assumptions/yoy_growth.yaml b/policyengine_uk/parameters/gov/economic_assumptions/yoy_growth.yaml
@@ -322,6 +322,140 @@ obr:
         - title: OBR fuel-duty supplementary release, receipts by vehicle type
           href: https://obr.uk/docs/dlm_uploads/Fuel-duty-supplementary-release_receipts-by-vehicle-type.pdf
 
+  petrol_spending_litre_proxy:
+    description: Unleaded-petrol spending proxy growth that preserves weighted road-fuel litres after dividing by model pump prices.
+    values:
+      2021-01-01: 0.09966723889828133
+      2022-01-01: 0.47125942029399615
+      2023-01-01: 0.09943596417596279
+      2024-01-01: -0.14810324567590538
+      2025-01-01: -0.0269132439679719
+      2026-01-01: -0.018120813771079436
+      2027-01-01: -0.027765858532455168
+      2028-01-01: -0.030878786058031737
+      2029-01-01: -0.04149818363243518
+      2030-01-01: -0.056482738187697334
+      2031-01-01: -0.00428158916658361
+      2032-01-01: -0.004182433778131878
+      2033-01-01: -0.004083258639577703
+      2034-01-01: -0.003984063745019917
+      2035-01-01: -0.003884849088554687
+      2036-01-01: -0.0037856146642757382
+      2037-01-01: -0.003686360466274796
+      2038-01-01: -0.0035870864886409226
+      2039-01-01: -0.0034877927254609586
+      2040-01-01: -0.0034877927254609586
+      2041-01-01: -0.003388479170819303
+      2042-01-01: -0.003388479170819303
+      2043-01-01: -0.0032891458187980227
+      2044-01-01: -0.0031897926634769647
+      2045-01-01: -0.0031897926634769647
+      2046-01-01: -0.003090419698933422
+      2047-01-01: -0.0029910269192421346
+      2048-01-01: -0.0028916143184762877
+      2049-01-01: -0.002792181890705958
+      2050-01-01: -0.002692729629998891
+      2051-01-01: -0.0024937655860348684
+      2052-01-01: -0.002394253790901746
+      2053-01-01: -0.0021951706246258196
+      2054-01-01: -0.0020955992415926383
+      2055-01-01: -0.001996007984031989
+      2056-01-01: -0.0018963968459926317
+      2057-01-01: -0.001796765821521329
+      2058-01-01: -0.001697114904662067
+      2059-01-01: -0.0015974440894569453
+      2060-01-01: -0.0015974440894569453
+      2061-01-01: -0.0015974440894569453
+      2062-01-01: -0.0014977533699451762
+      2063-01-01: -0.0014977533699451762
+      2064-01-01: -0.0014977533699451762
+      2065-01-01: -0.0014977533699451762
+      2066-01-01: -0.0014977533699451762
+      2067-01-01: -0.0014977533699451762
+      2068-01-01: -0.0014977533699451762
+      2069-01-01: -0.0014977533699451762
+      2070-01-01: -0.0014977533699451762
+      2071-01-01: -0.0014977533699451762
+      2072-01-01: -0.0014977533699451762
+      2073-01-01: -0.0013980427401638629
+    metadata:
+      unit: /1
+      label: Petrol spending litre-proxy growth
+      reference:
+        - title: HMRC Hydrocarbon Oils Bulletin
+          href: https://www.gov.uk/government/statistics/hydrocarbon-oils-bulletin
+        - title: OBR EFO March 2026 (fuel-duty receipts forecast)
+          href: https://obr.uk/efo/economic-and-fiscal-outlook-march-2026/
+        - title: RAC latest average petrol price
+          href: https://www.rac.co.uk/drive/advice/fuel-watch/
+
+  diesel_spending_litre_proxy:
+    description: Diesel spending proxy growth that preserves weighted road-fuel litres after dividing by model pump prices.
+    values:
+      2021-01-01: 0.13390420538515913
+      2022-01-01: 0.3702255435452164
+      2023-01-01: -0.01858407316867594
+      2024-01-01: 0.03164670292538285
+      2025-01-01: -0.0269132439679719
+      2026-01-01: -0.018120813771079436
+      2027-01-01: -0.027765858532455168
+      2028-01-01: -0.030878786058031737
+      2029-01-01: -0.04149818363243518
+      2030-01-01: -0.056482738187697334
+      2031-01-01: -0.00428158916658361
+      2032-01-01: -0.004182433778131878
+      2033-01-01: -0.004083258639577703
+      2034-01-01: -0.003984063745019917
+      2035-01-01: -0.003884849088554687
+      2036-01-01: -0.0037856146642757382
+      2037-01-01: -0.003686360466274796
+      2038-01-01: -0.0035870864886409226
+      2039-01-01: -0.0034877927254609586
+      2040-01-01: -0.0034877927254609586
+      2041-01-01: -0.003388479170819303
+      2042-01-01: -0.003388479170819303
+      2043-01-01: -0.0032891458187980227
+      2044-01-01: -0.0031897926634769647
+      2045-01-01: -0.0031897926634769647
+      2046-01-01: -0.003090419698933422
+      2047-01-01: -0.0029910269192421346
+      2048-01-01: -0.0028916143184762877
+      2049-01-01: -0.002792181890705958
+      2050-01-01: -0.002692729629998891
+      2051-01-01: -0.0024937655860348684
+      2052-01-01: -0.002394253790901746
+      2053-01-01: -0.0021951706246258196
+      2054-01-01: -0.0020955992415926383
+      2055-01-01: -0.001996007984031989
+      2056-01-01: -0.0018963968459926317
+      2057-01-01: -0.001796765821521329
+      2058-01-01: -0.001697114904662067
+      2059-01-01: -0.0015974440894569453
+      2060-01-01: -0.0015974440894569453
+      2061-01-01: -0.0015974440894569453
+      2062-01-01: -0.0014977533699451762
+      2063-01-01: -0.0014977533699451762
+      2064-01-01: -0.0014977533699451762
+      2065-01-01: -0.0014977533699451762
+      2066-01-01: -0.0014977533699451762
+      2067-01-01: -0.0014977533699451762
+      2068-01-01: -0.0014977533699451762
+      2069-01-01: -0.0014977533699451762
+      2070-01-01: -0.0014977533699451762
+      2071-01-01: -0.0014977533699451762
+      2072-01-01: -0.0014977533699451762
+      2073-01-01: -0.0013980427401638629
+    metadata:
+      unit: /1
+      label: Diesel spending litre-proxy growth
+      reference:
+        - title: HMRC Hydrocarbon Oils Bulletin
+          href: https://www.gov.uk/government/statistics/hydrocarbon-oils-bulletin
+        - title: OBR EFO March 2026 (fuel-duty receipts forecast)
+          href: https://obr.uk/efo/economic-and-fiscal-outlook-march-2026/
+        - title: RAC latest average diesel price
+          href: https://www.rac.co.uk/drive/advice/fuel-watch/
+
   consumer_price_index_ahc:
     description: Consumer price index year-on-year growth, modified to remove housing costs.
     values:
diff --git a/policyengine_uk/tests/test_fuel_duty_litres.py b/policyengine_uk/tests/test_fuel_duty_litres.py
@@ -0,0 +1,38 @@
+import pytest
+
+from policyengine_uk import Microsimulation
+from policyengine_uk.system import system
+
+
+def test_fuel_duty_is_litres_times_statutory_rate():
+    year = 2025
+    situation = {
+        "people": {
+            "adult": {
+                "age": {year: 35},
+            },
+        },
+        "benunits": {
+            "benunit": {
+                "members": ["adult"],
+            },
+        },
+        "households": {
+            "household": {
+                "members": ["adult"],
+                "region": {year: "LONDON"},
+                "petrol_spending": {year: 2_000.0},
+                "diesel_spending": {year: 1_000.0},
+            },
+        },
+    }
+    simulation = Microsimulation(situation=situation)
+
+    fuel_duty = simulation.calculate("fuel_duty", year).values[0]
+    litres = (
+        simulation.calculate("petrol_litres", year).values[0]
+        + simulation.calculate("diesel_litres", year).values[0]
+    )
+    rate = system.parameters.gov.hmrc.fuel_duty.petrol_and_diesel(year)
+
+    assert fuel_duty == pytest.approx(litres * rate)
diff --git a/policyengine_uk/tests/test_road_fuel_volume_uprating.py b/policyengine_uk/tests/test_road_fuel_volume_uprating.py
@@ -6,15 +6,26 @@
 from policyengine_uk.system import system
 
 
-def test_petrol_and_diesel_spending_use_road_fuel_volume_not_cpi():
+def test_petrol_and_diesel_spending_preserve_road_fuel_litres_not_cpi():
     parameters = system.parameters
     road_fuel_volume = (
         parameters.gov.economic_assumptions.yoy_growth.obr.road_fuel_volume
     )
+    petrol_proxy = (
+        parameters.gov.economic_assumptions.yoy_growth.obr.petrol_spending_litre_proxy
+    )
+    diesel_proxy = (
+        parameters.gov.economic_assumptions.yoy_growth.obr.diesel_spending_litre_proxy
+    )
+    population = parameters.gov.economic_assumptions.yoy_growth.ons.population
+    petrol_price = parameters.household.consumption.fuel.prices.petrol
+    diesel_price = parameters.household.consumption.fuel.prices.diesel
     cpi = parameters.gov.economic_assumptions.yoy_growth.obr.consumer_price_index
 
-    assert road_fuel_volume(2027) < 0
-    assert cpi(2027) > 0
+    assert road_fuel_volume(2024) < 0
+    assert cpi(2024) > 0
+    assert petrol_proxy(2024) != road_fuel_volume(2024)
+    assert diesel_proxy(2024) != road_fuel_volume(2024)
 
     dataset = UKSingleYearDataset(
         person=pd.DataFrame(
@@ -33,25 +44,66 @@ def test_petrol_and_diesel_spending_use_road_fuel_volume_not_cpi():
                 "tenure_type": ["OWNED_OUTRIGHT"],
                 "council_tax": [1_500.0],
                 "rent": [0.0],
-                "petrol_spending": [1_000.0],
-                "diesel_spending": [2_000.0],
+                "household_weight": [1.0],
+                "petrol_spending": [1_000.0 * petrol_price(2023)],
+                "diesel_spending": [2_000.0 * diesel_price(2023)],
             }
         ),
-        fiscal_year=2026,
+        fiscal_year=2023,
     )
 
     extended = extend_single_year_dataset(
         dataset,
         tax_benefit_system_parameters=parameters,
-        end_year=2027,
+        end_year=2035,
+    )
+    household_2024 = extended[2024].household
+
+    assert household_2024["petrol_spending"].iloc[0] == pytest.approx(
+        1_000 * petrol_price(2023) * (1 + petrol_proxy(2024))
     )
-    household_2027 = extended[2027].household
+    assert household_2024["diesel_spending"].iloc[0] == pytest.approx(
+        2_000 * diesel_price(2023) * (1 + diesel_proxy(2024))
+    )
+    assert household_2024["household_weight"].iloc[0] == pytest.approx(
+        1 + population(2024)
+    )
+    assert (
+        household_2024["petrol_spending"].iloc[0]
+        / petrol_price(2024)
+        * household_2024["household_weight"].iloc[0]
+    ) == pytest.approx(1_000 * (1 + road_fuel_volume(2024)))
+    assert (
+        household_2024["diesel_spending"].iloc[0]
+        / diesel_price(2024)
+        * household_2024["household_weight"].iloc[0]
+    ) == pytest.approx(2_000 * (1 + road_fuel_volume(2024)))
+
+    household_2034 = extended[2034].household
+    household_2035 = extended[2035].household
+
+    def weighted_litres(household, spending_variable, price_parameter, year):
+        return (
+            household[spending_variable].iloc[0]
+            / price_parameter(year)
+            * household["household_weight"].iloc[0]
+        )
 
-    assert household_2027["petrol_spending"].iloc[0] == pytest.approx(
-        1_000 * (1 + road_fuel_volume(2027))
+    assert weighted_litres(
+        household_2035,
+        "petrol_spending",
+        petrol_price,
+        2035,
+    ) == pytest.approx(
+        weighted_litres(household_2034, "petrol_spending", petrol_price, 2034)
+        * (1 + road_fuel_volume(2035))
     )
-    assert household_2027["diesel_spending"].iloc[0] == pytest.approx(
-        2_000 * (1 + road_fuel_volume(2027))
+    assert weighted_litres(
+        household_2035,
+        "diesel_spending",
+        diesel_price,
+        2035,
+    ) == pytest.approx(
+        weighted_litres(household_2034, "diesel_spending", diesel_price, 2034)
+        * (1 + road_fuel_volume(2035))
     )
-    assert household_2027["petrol_spending"].iloc[0] < 1_000
-    assert household_2027["diesel_spending"].iloc[0] < 2_000
diff --git a/policyengine_uk/variables/gov/hmrc/fuel_duty/fuel_duty.py b/policyengine_uk/variables/gov/hmrc/fuel_duty/fuel_duty.py
@@ -1,8 +1,5 @@
 from policyengine_uk.model_api import *
 
-STATUTORY_CONSUMER_INCIDENCE = 0.5
-ECONOMIC_CONSUMER_INCIDENCE = 1
-
 
 class fuel_duty(Variable):
     label = "Fuel duty (cars only)"
@@ -15,9 +12,4 @@ def formula(household, period, parameters):
         fd = parameters(period).gov.hmrc.fuel_duty
         petrol_litres = household("petrol_litres", period.this_year) / MONTHS_IN_YEAR
         diesel_litres = household("diesel_litres", period.this_year) / MONTHS_IN_YEAR
-        return (
-            fd.petrol_and_diesel
-            * (petrol_litres + diesel_litres)
-            / STATUTORY_CONSUMER_INCIDENCE
-            * ECONOMIC_CONSUMER_INCIDENCE
-        )
+        return fd.petrol_and_diesel * (petrol_litres + diesel_litres)
diff --git a/policyengine_uk/variables/household/consumption/diesel_litres.py b/policyengine_uk/variables/household/consumption/diesel_litres.py
@@ -7,7 +7,7 @@ class diesel_litres(Variable):
     entity = Household
     definition_period = YEAR
     value_type = float
-    unit = GBP
+    unit = "litre"
 
     def formula(household, period, parameters):
         return household("diesel_spending", period) / household("diesel_price", period)
diff --git a/policyengine_uk/variables/household/consumption/petrol_litres.py b/policyengine_uk/variables/household/consumption/petrol_litres.py
@@ -7,7 +7,7 @@ class petrol_litres(Variable):
     entity = Household
     definition_period = YEAR
     value_type = float
-    unit = GBP
+    unit = "litre"
 
     def formula(household, period, parameters):
         return household("petrol_spending", period) / household("petrol_price", period)
diff --git a/policyengine_uk/variables/input/consumption/diesel_spending.py b/policyengine_uk/variables/input/consumption/diesel_spending.py
@@ -10,4 +10,4 @@ class diesel_spending(Variable):
     value_type = float
     unit = GBP
     quantity_type = FLOW
-    uprating = "gov.economic_assumptions.indices.obr.road_fuel_volume"
+    uprating = "gov.economic_assumptions.indices.obr.diesel_spending_litre_proxy"
diff --git a/policyengine_uk/variables/input/consumption/petrol_spending.py b/policyengine_uk/variables/input/consumption/petrol_spending.py
@@ -10,4 +10,4 @@ class petrol_spending(Variable):
     value_type = float
     unit = GBP
     quantity_type = FLOW
-    uprating = "gov.economic_assumptions.indices.obr.road_fuel_volume"
+    uprating = "gov.economic_assumptions.indices.obr.petrol_spending_litre_proxy"

Original file line number	Diff line number	Diff line change
`@@ -0,0 +1 @@`
	`1`	`+- Compute fuel duty directly as calibrated petrol and diesel litres multiplied by the statutory duty rate, with fuel-spending proxies uprated by road-fuel litres and pump prices.`