APPENDIX 2
Memorandum from the Society of Business
Economists
I. SUMMARY
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.
II. THE SOCIETY
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.
III. NATIONAL
STATISTICS
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.
IV. NATIONAL
STATISTICIAN
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?
V. STATISTICS
COMMISSION
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.
VI. KPMG EFFICIENCY
REVIEW
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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