Select Committee on Treasury Appendices to the Minutes of Evidence


Memorandum from the Society of Business Economists


  1.  Whilst the long list of inclusions in National Statistics is a promising start and to be welcomed, the philosophy of holding back an unspecified number of exclusions, is a less satisfactory feature of the launch of National Statistics, which has aroused a certain amount of controversy. It is not entirely clear what useful public purpose is served by this dual categorisation since the production of all official statistics is still likely to remain subject to the same standards. Meanwhile, distinctly identifying the inclusions and exclusions, as has been done by the Scottish Executive in its new three-year plan, is a helpful exemplar.

  2.  Business economists identify the development of improved measurement of the service sector, of productivity and of the new economy as key features of desirable National Statistics outputs.

  3.  The progressive development of the National Statistics web-site, including a gradually increasing provision of free data, is welcomed. Further and faster continuation of this is desirable.

  4.  To match National Statistics, it may be logical to have a National Statistician but will it of itself make much real intrinsic difference or is it just a titular change? There are, of course, numerous concomitant changes—a new occupant of the top position, restructuring and other features emanating from the Efficiency Review, initiatives promising to strengthen links with users. But these do not derive from the change of name and could all have been done without it.

  5.  Insufficient time has elapsed since the new arrangements were announced and not enough has been publicly announced on the subsequent actions taken to enable useful or constructive comments to be made on much of National Statistics or the Statistics Commission. The circulation for user consultation of Theme Working Groups' draft three-year plans, particularly those relating to Commerce, Energy and Industry, and the Economy, is very much to be welcomed.

  6.  The effects of the implementation of the Efficiency Review need to be monitored to ensure the avoidance of deterioration of quality or interruption of outputs. Its recommendations of significant cost savings over five years, albeit that they should be reinvested, are based to a considerable extent on outsourcing, particularly of IT, and "natural wastage". It is desirable that processes to ensure that quality does not suffer in the pursuit of efficiency should be encouraged and adopted. The need for flexibility and awareness in making cuts should be balanced by a need for reappraisal if those in certain areas go too far.


  The Society submitted a Memorandum to the Sub-Committee on its inquiry into the ONS (Treasury Committee's First Report 1998-99, HC43-II: Appendix 2). It has been invited to submit written evidence on the launch of National Statistics, the Committee's Report and other issues which have subsequently arisen.

  It should be emphasised that what is crucially important to business economists is that National Statistics should provide accurate, timely statistics which are relevant to business analysis and planning, and make the best use of new technology to expand access and improve efficiency. This would help to keep the UK, with its world-leading financial and business services sector, in the forefront of the information society.


  The events leading to the new arrangements have been well-ventilated. It is acknowledged that there have been considerable real achievements in recent years, and now there is scope to do more.

  The Framework Document is not particularly controversial, though the length of its gestation and birth was disquieting both to outsiders and members of the Select Committee (HC 293).

  The Document (paragraph 3.1) states the aims of National Statistics as being user-oriented, mentioning Parliament and Assemblies, citizens, business, researchers, analysts, other customers and EU/international requirements. They should draw on the views of users and providers (paragraph 3.4), and postulates a transparent mechanism for taking into account the views of users and that the Statistics Commission will have access to the information so generated.

i.  Scope of National Statistics

  Much attention has focused on which statistics are included within the umbrella of National Statistics. Once the list was published in Annex A of the Framework Document, there has been criticism by users of exclusions, ranging from the RPI [singled out for split responsibilities between the National Statistician (methodology) and the Chancellor of the Exchequer (scope and definition) and clearly a key economic indicator] and monthly hospital waiting lists to statistics produced by local government, agencies and privatised corporations (for which official statistics were available prior to privatisation). It is not proposed here to further nit-pick on this issue, though it should be mentioned, in passing, that many of the series specified in Annex A refer to published statistics and databases. There are many additional data which are unpublished; specifying them becomes impractical and otiose. Interestingly, the Scottish Executive Statistical Plan, 2000-01 separately identifies individual blocks of work as either being or not being National Statistics; this sets a good example of explicitness which other departments might usefully consider following.

  There appears to have been little public discussion of the implications for data currently excluded from National Statistics, though the Select Committee devoted a considerable part of its time in examining witnesses on 1 March 2000 (HC 293) in probing this area. Since the Framework Document takes great pains to emphasise the importance of improving quality and relevance, improving public confidence and operating efficiently, it is surely inconceivable that excluded statistics, which will obviously continue to be available, will not be subject to the same standards as the rest. Indeed the sections on responsibilities of Ministers (paragraph 4.1) and Heads of Profession (paragraph 4.4) confirm this interpretation.

  So what is the real purpose and effect of exclusion? Is it a storm in a teacup, a rearguard action, a retention of apparent power or negotiating cards, sleight of hand or is it just a matter of time before this artificial division between "ins" and "outs" on what are patently "official statistics" disappears under pressure from the Statistical Commission and users.

ii.  User consultation and improvements sought

  An encouraging sign is that, since the introduction of a 12-theme structure for grouping areas of statistical information, with designated responsibility for co-ordinating and supervising activity for each theme, there has begun to circulate a series of Theme Working Groups' three-year plan consultation documents, which will feed into a forthcoming National Statistics Plan. It is noted that the first two of these relate to themes of great interest to business economists—Commerce, Energy and Industry, and the Economy. For the statistical user community to be consulted in advance about official programme plans has to be a welcome outcome of the new arrangements. Would that such a process had been available at the time of the Rayner reviews.

  Improvements which are desired by business economists include better statistics on: the service sectors, which have become more significant, compared with manufacturing; on the measurement of productivity; and on measuring the new economy. New types of company are appearing, which do not always fit well with the traditional classification system. New trading channels require new ways of data capture and dot.coms may come and go more quickly than more traditional types of company. The growing recognition of such needs is evidenced by the inclusion of a number of initiatives in these areas in the draft three-year plans and it is hoped that such developments will be adequately resourced.

  However, the operational guidance in the Document is dominated by the perceived need to restore public confidence in official statistics.

iii  Improvements in progress—methodology and web-site

  Improvements on technical handling of statistics and on survey methodology are noted and welcomed. The importance of this aspect of operations is enhanced by the recent ONS appointment of a Director of Quality and Methodology.

  The improvement to the National Statistics web-site is welcomed with its gradual extension to the provision of freely available data. We would like to see it more rapidly developed in the future in keeping with its growing importance as a means of world-wide statistical distribution. Other leading statistical organisations' web-sites eg those of the US government, point the way for good practice.

  It may also be necessary to commission external research to improve information on a range of topics such as the stock of knowledge and on people's skills.

  It is worth remembering that the disastrous Rayner cutbacks were introduced just as the economy was entering a period of rapid change. We would not want a repetition of such a policy.


  In trying to penetrate the text on this topic, it is not easy to determine, in practice, the difference between the duties of the National Statistician and the former Director of the ONS, both in relation to the ONS itself and as Head of the GSS. Greater explicit emphasis is, of course, laid on quality and relevance, improving public confidence, efficient operation and performance reporting.

  The KPMG Efficiency Review Report was critical of the management skills of ONS senior management, which majored on professional statistical skills. It is not clear whether this apparent defect has been remedied since the appointee is, sensibly, a professionally qualified statistician, who has been presented as having an extensive background in managing statistics and implementing new management forms and processes in official statistics, but whose "beneficial" contribution may derive more from having been an external candidate. That said, it seems to be potentially an improvement to again have someone with experience of running a national statistical service compared with the largely academic background of his predecessor. No personal criticism is intended; merely that this has been the third external appointment to the top ONS post in succession. What conclusion should be drawn?


  The establishment of the Commission was announced in October 1999 in the White Paper, its chairman was appointed 29 March 2000, its Members and Chief Executive were announced on 7 June, and its first full meetings have been scheduled in September and October. Therefore there is little hard public evidence of its plans and achievements and thus it seems too early to comment constructively on its activities or performance. Its establishment, arising out of the Green Paper consultations, has been welcomed [despite the criticisms of the selection procedures for Members ventilated during the Committee's examination of witnesses on 1 March 2000 (HC 293)] and there are high hopes for its contribution and effectiveness. Its first Report for 2000-01 will be eagerly awaited.

  It is worth mentioning that, with the exception of the financial sector, the membership of the Commission does not include representation from business, in which there are numerous users of official statistics; it is hoped that their interests will not be forgotten.


  In its previous submission to the Committee, the Society stated that:

  ". . . a climate of regular government cost-cutting . . . represents a repetition of the philosophy, albeit in small steps, which could be just as damaging over a period as were the swingeing Rayner cuts but may attract less public notice." (43-II, Appendix 2, paragraph IV.3.)

  "Continuous smaller annual cost reductions may be more apparently bearable and have lower profile but can be just as damaging over a number of years. It is a policy which should be resisted." (43-II, Appendix 2, Paragraph I.4.)

  This point was particularly drawn to the attention of Treasury Ministers by the Sub-Committee in its Report. (43-I, Paragraph 55.)

  An Efficiency Review of the ONS was commissioned by HM Treasury from KPMG. Efficiency improvements, which do not jeopardise that quality and integrity of the output but seek to eliminate wasteful expense, are, in principle, to be welcomed. Cost-cutting which reduces output is undesirable and should be resisted. Thus it is desirable that processes to ensure that quality does not suffer in the pursuit of efficiency should be encouraged and adopted. The need for flexibility and awareness in making cuts should be balanced by a need for reappraisal if those in certain areas go too far.

  KPMG reported in January 1999. Its recommendations fed the recommendations of the Treasury Efficiency Review Steering Group, which were accepted by the Economic Secretary to the Treasury; a brief report on the progress of implementation is available on the National Statistics web-site. Perhaps the Sub-Committee should seek more detailed information in this area than has so far been publicly available. In particular, it may wish to probe whether the depth of management available in National Statistics has sufficient experience of outsourcing to achieve effective implementation.

  KPMG identified potential savings of one sixth, £120 million over five years out of a total CSR budget of approximately £125 million per annum relating to existing outputs. The ONS planned programme also includes significant new developments and outputs. The findings were supported by the proviso that all the savings could be re-invested.

  A considerable proportion of the postulated savings was predicated on outsourcing and related staff reductions, based on "natural wastage". The report states that while most outsourced IT contracts for OGDs have been successful, it recognises that some have not. [KPMG Report, Potential Benefits from PPP (3), page 44.]

  Delays or interruption in the provision of regularly-produced statistics on which users are dependent is unacceptable and too awful to contemplate. For example, the disappearance of timely detailed trade statistics relating to UK trade with the EU following the changeover in collection method from the monthly HMCE/SAD source to the quarterly Intrastat inquiry was an unhappy experience.

  Our concern over the cost saving and outsourcing is that they might be implemented poorly and have deleterious effects. However, the nub lies in the precise contracts and monitoring arrangements between the purchaser and the provider.

  With the benefit of hindsight, some such policies may be acknowledged to have been mistaken (eg as recently admitted on Rail deregulation) and the pendulum may swing back.

  It is worth noting that the recommendations covered a five-year programme of which one and a half have now passed, and the coverage of IT functions is not due until the third year.

October 2000

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