Is the Office for National Statistics fit for purpose?

UK Chancellor Of The Exchequer Rachel Reeves Mansion House Speech — (Image credit: Isabel Infantes/Reuters/Bloomberg via Getty Images)

The Office for National Statistics (ONS) is the UK government’s statistics authority, charged with “collecting, analysing and disseminating statistics about the UK’s economy, society and population” – chiefly for use by government and policymakers. The ONS is the executive office of the UK Statistics Authority, with headquarters in Newport, South Wales, and since 2008 it has been a non-ministerial department that reports directly to parliament, rather than the government.

But there’s a growing feeling that some of its statistics are no longer fully reliable. In a Mansion House speech in November, the Bank of England’s governor, Andrew Bailey, said that unreliable labour market statistics have become a “substantial problem” for the UK central bank in terms of policymaking. In particular, the Bank’s chief economist, Huw Pill, believes that ONS figures are probably understating employment growth and overstating the high rates of labour-force inactivity. In addition, in recent months the Office for Budget Responsibility and parliament’s Treasury Select Committee (plus several think tanks) have all flagged up fears about the reliability of ONS data – and the resulting adverse effects on policymaking.

What problem is the Office for National Statistics facing?

In terms of the labour market, a big part of the issue is falling response rates for the ONS’s Labour Force Survey (LFS). This vital survey involves a letter sent to households and followed up with a phone or in-person interview. Whereas ten years ago response rates were about 50%, they were falling even before the pandemic and then plunged during the various lockdowns. Since then, they’ve remained low, at just 17.3% in 2023 and are expected to be even lower in the past year. Ian Diamond, the ONS’s chief, says that, even after raising the incentives for participating in face-to-face interviews from £10 to £50, the public has become much more reticent. The reasons included “cautiousness around the sharing of personal information, declining trust in government and public institutions, a reluctance to have interviewers inside homes and increased challenges accessing secure/gated properties”.

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What are the implications?

The smaller sample means the data is less reliable and some economists think the LFS is now more likely to record people who are at home – thus overestimating the level of economic inactivity overall. The Resolution think tank estimates that the LFS may have “lost” up to 930,000 workers. And the ONS itself has downgraded the status of its employment data from “national statistic” (its gold-standard category) to “experimental”. That’s a problem, as it means policymakers are flying blind and “grand narratives rest on shaky numbers”, says The Economist. Why has Britain – alone among rich Western nations – suffered such high levels of economic inactivity post-pandemic? The question could scarcely be more important to the country’s future, yet it seems the phenomenon might well have been a “statistical artefact of increasingly dodgy data”. The LFS is “essentially useless”, says Xiaowei Xu of the Institute for Fiscal Studies. “It’s a huge problem.”

Are improvements on the cards?

The ONS is working on a new “online-first” version of the survey, which will ask shorter questions, making it less hassle for participants, and boost participant numbers. The system is currently being trialled through introductory letters containing a QR code that can be scanned from a mobile phone. But last month, Diamond admitted this probably won’t be ready to go live before 2027 – leaving the agency’s key stakeholders unimpressed. Meg Hillier, chair of the Treasury Select Committee, says the delay would rob policymakers of reliable data about the jobs market, making “some of the most consequential decisions taken by the Treasury and Bank of England challenging at best and misinformed at worst”.

Are there other problems with the Office for National Statistics?

Yes. When it comes to net inward migration, the ONS has been dramatically underestimating the numbers. Recently it revised its figure for 2023 from 740,000 to 906,000 (that’s almost another Oxford). And it upped its 2022 figures, too – from 606,000 to 872,000 (a second Stoke); or look at housing, where the ONS data is “not fit for purpose”, says Neal Hudson in the Financial Times. It relies too heavily on incomplete building-control data from one source, the National House Building Council, which undercounts the true number of new dwellings. The ONS’s numbers on production, trade and GDP are widely regarded as more reliable, says Andrew Sentance on CapX. Even so, the Living Costs and Food Survey, an important factor when it comes to assembling the GDP figures, now gets a similar low response rate to the LFS, making data less reliable and (even) more susceptible to later revision.

What can be done?

The ONS deserves credit for being a generally trusted source of accurate data, says Sentance. But its ability to adapt its data collection and analysis techniques nimbly is “a vital part” of its remit, and it’s where the agency has sometimes been “slow and hesitant”. Problems with the LFS, for example, first emerged in 2021; a solution should be in place by now, not 2027. The ONS’s regulator, the Statistics Authority, should demand a 90-day action plan setting out how the agency proposes to become “action-oriented and responsive” to users’ concerns; and failing that, the Treasury should intervene and oversee improvements. As for response rates, the state needs to become far more assertive about compelling participation in nationally important data collection – in every area from the economy, to health, to the justice system, says The Economist. “Britain is a blind state.” Given the country’s deep-seated problems, that’s a self-inflicted wound it can scarcely afford.

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