Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 120-139)



  120. The £105 billion figure, what was the base figure?
  (Mr Cook) Sorry?

  121. The revision was £105 billion, what was the total it was a revision of?
  (Mr Cook) It was £760 billion.

  122. Of the order of 15 per cent.
  (Mr Cook) It was 100 billion on 760.

  123. So it was of the order of 15 per cent of the total?
  (Mr Cook) Yes.

  124. What sort of decisions might that have influenced?
  (Mr Cook) It did not influence the national accounts because our national accountants took the data and validated it against other sources which were not part of the survey. There has been no change to national accounts. What it would have influenced, I have no doubt, is anyone looking at the performance of the pensions industry.

  125. They would have had too rosy a picture?
  (Mr Cook) They would have had a very different picture from what we presented, yes.

  126. There was another change. The Times on 22 October reported that following an investigation by the ONS the estimated value of pension contributions for last year has been reduced from £86.4 billion to £43.7 billion, almost half. You had an investigation I believe which showed the original Government figure for new investment included billions of pounds of pension transfers. Can you explain this to us?
  (Mr Cook) That error was a result of labelling which was not precise in a statistical table which had been prepared accurately itself, and the statistics were accurate, but the labelling did not make it clear that it was dealing with gross flows into pension schemes and out of them rather than netting off the flows which go from one pension scheme to another.

  Chairman: Double counting.

Mr Beard

  127. Which should it have been? Should it have been the net flow?
  (Mr Cook) No, it was reporting on the information available from those inquiries so it was reporting on the gross flows. Net flows were not estimated in that survey. It should have been more effectively labelled. It had been labelled for well over 20 years with a footnote at the bottom of the table of what it was actually rather than being very clear in the actual table heading.

  128. I am getting confused. What was the table meant to be: two gross flows?
  (Mr Cook) Two gross flows, yes.

  129. Is that what these figures I quoted were?
  (Mr Cook) The £85 million was a gross flow, yes.

  130. The £84 million was gross?
  (Mr Cook) Yes. In fact, the net flows are obtained from other information that we gather so when we produce again the national accounts side of the office, another source of information is obtained which estimates the netting out that goes on in the insurance industry. This particular survey did not collect that netting out.

  131. This figure of £86.4 billion was a gross flow and that gross flow then reduced to £43.7 billion, that was the nature of the gross flow after revisions?
  (Mr Cook) When you took the flows between pension funds, yes. When you derive net flows from the gross flows figure by using other information about the transfers between pension schemes, the net inflows into pension schemes becomes £46 billion.

  132. How do you end up with an error of this magnitude? Does anybody have a reality check on this? Do people calculate figures to three decimal places and find out by a factor of two?
  (Mr Cook) What will rectify this failure more significantly is the production, which we will produce now, of a table which takes this information and works right through to national accounts and brings in each of the alternative sources in pensions so you can see the complete flow of individual sources of information right through to the final net flow into pension funds which is the aggregate that we publish. The problem with this was that we were publishing an entirely separate survey and yet its effective use required the bringing together of other information and that was not clear.

  133. Lightening seems to have struck the same part of your organisation twice, does it not, one error in 1999 and the other in 2002? Is there something wrong with the pensions area in the statistics they cover?
  (Mr Cook) I think it is an area in which we believe we have not responded quickly enough to the significance of the statistics which are used in terms of the materiality of the debate on the numbers rather than reflecting the effort needed to produce the statistics. The systems which have been used have been quite old. We have inherited this work from other organisations.

  134. Pensions have moved to the centre of the political forum now. There is a lot of attention put on them. How reliable are national statistics on different aspects of pensions? Will they bear the weight of so much attention?
  (Mr Cook) One of the most important elements of pensions policy, of course, is population estimates and projections. I think there we do a huge amount of work with Government actuaries and with other organisations and we have very high quality and very analytically rich pensions statistics. We have quite a comprehensive set of income measures which tell you about the income position of people both in retirement and near retirement. We have very effective savings information. We have proposals for a survey of wealth which will give us information about the wealth holdings of people before and after retirement. This area of pension funds is one part of the whole picture of the information that is needed in the pensions policy but what I can assure you is that the broader mix of statistics that we have is an area of considerable concern to my office and one that I think we are able to perform very effectively in. The United Kingdom has an incredibly rich amount of work and understanding about the income and position, for example, of its retired populations which provides a very informed amount of public policy in a debate on its pensions. The area I think where we have more vulnerability is understanding the wealth position of people who are retired and coming to retirement age and there we have got quite a comprehensive proposal for a wealth survey that we are very keen to proceed with.

Kali Mountford

  135. It seems to me that first of all we had a million missing people and now we seem to have billions of pounds worth of money which never existed either. From what you have just told us the money was never there. I would be interested to see what your wealth survey tells us but perhaps meanwhile, when we put similar questions to Sir John Kingman, he said to us ". . . we are trying to get to the bottom of the series of mistakes that occurred there which seem to be somewhere around the interface between the Department of Work and Pensions and the Office for National Statistics. What we are going to do is to challenge the National Statistician to take hold of the statistics in the Department of Work and Pensions and to make sure that department operates to the highest standards. . ." Are there weaknesses there and what are they?
  (Mr Cook) I am not aware of the weaknesses that Sir John was talking about. In terms of our work with Work and Pensions we rely hugely on benefits data, for example, which is a significant driving force of neighbourhood statistics. What I can say there in terms of information management is they are probably one of the leading departments in the public sector in the effectiveness of the use of administrative data and statistics.

  136. He put to us that he thought there was a cultural problem in the Department. If there is a problem in the culture of developing and using statistics in the Department of Work and Pensions that would have a significant effect on policy. Are you aware of such a culture?
  (Mr Cook) No, I am not. My Department has enacted occasionally a vigorous relationship with the Department of Work and Pensions but it is one where on a professional basis it is a very productive relationship.

  137. You are satisfied entirely that the interface between you and them is of the highest professional standard and we are getting absolutely spot-on information and we can all go away and sleep easily in our beds tonight knowing that our pension funds are safe in their hands?
  (Mr Cook) I ceased recently the production of vacancy statistics, for example, some nine months ago because with the change to Employment Direct the registered vacancy statistics had a somewhat different coverage than they have had traditionally. I regarded it as inappropriate to regard that as a time series that meant the same thing after Employment Direct came in as it did before so I ceased producing that. That is a decision I have made but that is not a criticism of the professionalism of the Department of Work and Pensions, it is saying that one of their administrative sources has changed its quality. We have a considerable variety of debates and discussions of that sort but certainly we have an effective professional relationship. We have had, as you might have noticed in the media, occasional differences in other ways but on a professional basis I would have no concerns, it is similar very much to the other relationships we have.

  138. These differences you have just alluded to, would they affect these outputs?
  (Mr Cook) No.

  139. So the next time a minister makes an announcement on pensions we can be confident that the figures he is using are absolutely right?
  (Mr Cook) If not you should be coming back at me.

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