Benefit expenditure paid outside UK private households (planned)

Why this matters¶

Calibrating FRS household weights so that simulated state_pension matches a national spending total assumes every pound of that total lands on a household the FRS samples. It doesn’t:

• State Pension paid abroad: pensioners living overseas receive the State Pension they built up. DWP’s benefit expenditure tables report the amount paid to recipients abroad, and Stat-Xplore gives the caseload by country. None of these people are in the FRS.

• Disability and carer benefits paid abroad: limited cases. The DLA care component, the PIP daily living part, Attendance Allowance and Carer’s Allowance can be paid to people living in an EEA country or Switzerland who are covered by the Withdrawal Agreement; the mobility parts can’t be paid abroad. DWP’s tables report each benefit’s spending outside the UK.

• Institutional residents: care-home residents keep their State Pension and can get some other benefits (Pension Credit, or Attendance Allowance if they pay for their own care), but the FRS doesn’t sample care homes. Their entitlements feed into the DWP outturn but not into PolicyEngine’s state_pension totals.

Where a target includes these groups, calibration pushes their spending onto FRS households and overstates what UK private households receive.

Fraud and error is a different case. DWP counts overpayments as benefit spending although they go beyond what claimants are entitled to: 3.2% of benefit spending in its FYE 2026 estimates, against 0.4% underpaid through official error. That money does reach households, so it doesn’t overstate what they receive, but it matters where the model simulates entitlement rather than receipt.

Already done for State Pension paid abroad. Microcosm no longer binds the OBR State Pension line. State Pension is now bound to resident figures from DWP Stat-Xplore (Great Britain) and the Northern Ireland Department for Communities, and the OBR line and DWP’s “paid outside UK” line are kept as diagnostics. The plan began as microcosm#1069, which now tracks the open follow-ups, and the change landed in microcosm#1084 (merged 2 October 2026). The resident series still includes care-home residents. The same question is open for other programmes.

Scope¶

Phase 1: quantify the gap by programme¶

For each benefit programme the calibration targets, identify the share of the published total that goes outside UK private households. DWP and HMRC publish enough data to assemble a first-pass table. The fraud and error column is recorded separately: that money reaches households, so it isn’t part of the gap.

Sources: DWP Benefit expenditure and caseload tables and Stat-Xplore (payments abroad), the DWP Fraud and Error in the Benefit System annual release, HMRC’s annual report and accounts (Child Benefit fraud and error), programme-specific breakdowns, and the rules on care homes (Housing Benefit Regulations 2006 reg. 9(1)(k) and (4) and the pension-age equivalent; PIP Regulations 2013 reg. 28; DLA Regulations 1991 reg. 9) and on Winter Fuel Payment residence (SI 2025/969 reg. 2 for England and Wales; SR 2025/142 reg. 2 for Northern Ireland).

Phase 2: subtract from calibration targets¶

Once the gap is quantified per programme, each calibration target should be the UK-private-household part of the total, not the full total. Microcosm’s State Pension change does this for pensions paid abroad by binding a resident series instead; that series still includes care-home residents. Where no resident series exists, the target can carry an explicit private-household share (0–1, default 1) with a cited source for each override.

This avoids the overweighting bias without trying to synthesise out-of-scope households.

Phase 3: explicit out-of-scope correction (optional)¶

For headline aggregates that need to match the full outturn (e.g. fiscal cost of a reform), maintain an out-of-scope additive correction per programme rather than synthesising fake households. This is preferable because:

• Distributional analyses already get the right answer at Phase 2 (UK private households are correctly weighted to their own outturn).

• Synthesising overseas / institutional households would require strong assumptions about their characteristics that aren’t validated against any micro-data source.

The additive correction would live in the data pipeline and appear in PolicyEngine UK as an explicit non-household spending line.

Implementation outline¶

This is mainly a data-side change in Microcosm UK’s target register. (policyengine_uk/programs.yaml is metadata on model coverage, not calibration targets, so it is not the place for these shares.) The changes in this repo are small:

• a non-household spending line for the Phase 3 correction, if adopted;

• documentation linking the affected benefit variables to this page.

Open questions¶

• Should the private_household_share be year-varying (e.g. the overseas share of State Pension spending was 4.3% in 2019-20 and 3.9% in 2024-25 in DWP’s outturn tables) or held flat?

• For Universal Credit, if the FRS samples some people in supported accommodation, what’s the correct private-household-share value: strictly < 1, or 1 minus a smaller residual?

• For the household-calculator (single-household) interface, the private-household-share correction shouldn’t apply, because the user represents their own household. Confirm the correction is only on the microsim weighted aggregates.

References¶

• DWP, Benefit expenditure and caseload tables: spending by benefit, including payments abroad.

• DWP, Fraud and Error in the Benefit System: estimates of benefit overpaid through fraud and error and underpaid through official error.

• DWP, Stat-Xplore: caseloads by benefit, including State Pension recipients by country of residence.

• HMRC, Annual reports and accounts: Child Benefit error and fraud estimates.

• GOV.UK, Child Benefit if you leave the UK: when Child Benefit is paid for families abroad (EEA, Switzerland and social security agreement countries).

• Issue: #842. Related: #1621 (UK pipeline alignment) and microcosm#1069 (UK pensions follow-ups after #1084).