Baseline methodology

Cause and effect, not forecast

The economy is not a calculator. It is a transmission system. Mathanics is an economic literacy machine: it shows the structural cause and effect of a decision — which channels carry the impulse, who is exposed, which behaviours respond, and where stress accumulates. It is deliberately neutral about exact magnitudes.

The £1 panel is a teaching device. It shows the first-round allocation of pressure, relief, cost, tax, import or dividend share across actors, rebased to 100p. It is not a literal cashflow trace and not a forecast.

Where size matters, the engine uses qualitative magnitude bands (for example Signal / Standard / Forceful / Stress / Damage on a Bank Rate move) — not a free-form rate input. Larger bands intensify the same channels and stress points; they do not invent new mechanisms.

Four layers

Baseline: The starting economic map of sectors, actors and stress points the engine pulls levers against.
Scenario: A mapped lever (rate move, tax change, supply shock, credit restriction, productivity improvement) applied to that baseline. Each scenario passes strict validation before it renders.
Flow model: The transmission of pressure between actors — first-round effect, behavioural response, delayed effect. Cause and effect, not prediction. Not a literal cashflow.
Gauge model: Non-cash signals: inflation direction, cashflow direction, stress thresholds and distribution markers.

Current baseline

Reference UK Economy is currently stylised and manually calibrated. It is designed to make policy flows visible. It is not an official forecast or national accounts model.

Future versions may be updated from ONS, Bank of England, OBR and DMO sources through an admin-approved monthly process.

Honest disclosure

Current baseline: stylised / manual.

Future baseline: admin-approved official-data calibration.

Official data and stylised assumptions

Pressure separates baseline calibration from scenario simulation. Some values can be pulled from official sources. Others must be derived or stylised because the economy cannot be reduced honestly to a single table.

The rule is: Official where possible. Derived where transparent. Stylised where necessary. Always labelled.

Current proof: Bank of England Bank Rate is the first official-source pull.

Current simulator baseline: still stylised/manual unless a reviewed baseline is explicitly published.

Scenario taxonomy

Every mapped active scenario sits in one of five families. Each family describes the kind of transmission the engine routes — never an exact macro forecast. The current set covers twelve active scenarios; further levers are visibly disabled until they pass strict validation.

Monetary: Bank Rate moves in both directions (a rise from a zero floor and a cut from a restrictive level), each with qualitative magnitude bands. The central bank is the originator; commercial banks become more or less credit-risk exposed at stress bands.
Fiscal: Tax and spending levers — VAT rise, income tax rise and cut, government spending up and down. First-round tax / relief allocation is routed across households, firms and the government balance.
Supply (real): Real-economy shocks and improvements — energy price shock and productivity improvement. Distinct first-round signals on inflation and cashflow direction.
External / FX: Cross-border channels — sterling depreciation and appreciation. Import-price pass-through, export competitiveness and foreign-asset valuations cut both ways.
Financial stability: Credit-restriction levers (e.g. mortgage lending rules tightened) routed through borrowers, banks and housing exposure.

Shock Signature Minimum Viable Soul^®

Every active scenario carries a compact Shock Signature — a three-second read of the shape of the shock before the full transmission panel loads. It is generated from the same scenario data, not a separate narrative.

A one-sentence core mechanism (the soul line).
Who is squeezed first, who is offset, where the inequality tilt sits.
A tone (pressure, relief or mixed) and a mechanism family driving the visual beam — no raw £bn values, no internal ids.

Magnitude bands, not free-form rates

Where the engine supports magnitude, it uses qualitative bands. Bank Rate Rise runs Signal +25bps, Standard, Forceful, Stress, Damage; Bank Rate Cut has a matching descending set. Larger bands intensify the same channels and stress points — they do not invent new mechanisms.

No free-form numeric rate input.
Bands are qualitative transmission cases, not forecasts.
Each band still passes strict scenario validation.

Strict scenario validation

A scenario only renders if it passes structural checks. This is how the engine refuses to fake an answer.

Every scenario has a family, an originator and at least one channel, actor impact and stress point.
Each active scenario also carries a Shock Signature (soul line, pressure / offset / inequality tilt).
The £1 first-round allocation totals 100p — pressure shares, not a literal cashflow.
The inflation signal is qualitative (direction and conditionality), not a mechanical CPI number.
The cashflow direction panel says who is sending and who is receiving, conditional on exposure.
Coming-soon scenarios are visibly disabled and cannot render transmission panels or appear in compare mode.

Single-lever view — and why

The simulator lets you trace one lever at a time. In the real world policymakers almost always play levers in chords — monetary, fiscal and supply-side moves bundled together, sometimes reinforcing, sometimes offsetting, sometimes in open conflict. The single-lever constraint here is a deliberate teaching choice: isolating one transmission mechanism is the only way to see clearly which channels carry the impulse, who is exposed, and where stress accumulates. Combinations explode the state space and muddy causation. A future Policy mix mode will let scenarios be stacked once the single-lever transmissions are well-understood.

Real-world combinations (UK)

COVID-19 (2020–21): BoE cut Bank Rate to 0.1% + £450bn QE simultaneously with Treasury's furlough scheme, VAT cut to 5% for hospitality, business rates holiday, and Eat Out to Help Out. Monetary + fiscal moving together.
2008 GFC: Rate cuts + QE + bank recapitalisations + temporary VAT cut (17.5%→15%) + fiscal stimulus, all stacked.
Truss mini-budget (Sept 2022): Large unfunded tax cuts (fiscal loosening) while BoE was tightening — a deliberate (and infamous) combination that pulled in opposite directions and broke the gilt market. A great case study in conflicting combinations.
Post-2010 austerity: Fiscal tightening (spending cuts, VAT 17.5%→20%) paired with ultra-loose monetary policy (0.5% + QE) to offset the drag.
Energy crisis 2022: Energy Price Guarantee (fiscal subsidy) + windfall tax + BoE hiking rates against the inflation shock.

What the £1 panel is and is not

It is the first-round composition of pressure for the selected scenario, rebased to 100p — pressure / relief / cost / tax / import / dividend share across actors.
It is not a literal cashflow trace, an exact £bn figure, or a forecast of eventual incidence after every behavioural and delayed effect.
At larger magnitude bands the same composition can intensify without inventing new actors. The shape of the transmission is the message.

Back to the simulator.