Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 1-19)



  Q1 Chairman: Karen Dunnell, may I welcome you to your first appearance before this Sub-Committee. Would you introduce yourself formally and your team, please?

Ms Dunnell: Thank you. I am Karen Dunnell, the National Statistician and the Registrar General for England and Wales. This is Hilary Douglas, our Chief Operating Officer; Dennis Roberts, the Deputy Registrar General and Executive Director of the Office; and Colin Mowl, the Executive Director of Macroeconomic Statistics and Labour Market Statistics.

  Q2 Chairman: Thank you very much and congratulations from us on your appointment. Len Cook, your predecessor, set out in the Annual Report we are looking at today six key areas you are probably familiar with. Do you agree with those or do you have your own?

  Ms Dunnell: No; I am very much working now with the Office to, what I call, consolidate Len's inspiration. We are moving forward with the programme, as it appears in the Report, focusing first on delivering our very large programme of statistics which has to change constantly in response to new demands and the environment and then, very importantly, carrying on with and completing our modernisation programme. We also, of course, have challenging targets to meet on both efficiency and relocation and the other most important thing is to do more work with the Government's Statistical Service to strengthen independence and trust in statistics right across government.

  Q3 Chairman: Right. Just to be clear, his six challenges are still your six challenges.

  Ms Dunnell: Yes, indeed; we have not changed them. We only changed the way we approach it, but we have not changed the focus of the office, no.

  Q4 Chairman: Fine. Now we will certainly come a little later to the modernisation programme that you referred to, but as well as being appointed National Statistician you have also become Registrar General and you are head of the Government Statistical Service. Do these three jobs really go together? Are the other two not going to distract you from the core task of running the ONS?

  Ms Dunnell: I think most people who are appointed head of government departments have very wide ranging portfolios. This one has been in existence as it is since 1996, but certainly the combination of a large portfolio of statistics and the role of Registrar General has been in place for 100 or more years so I have a very strong team of directors; we share out the work between us. That was the job I applied for and got and so we have plans to take it forward.

  Q5 Chairman: You are ready to advise on Royal weddings if required?

  Ms Dunnell: With my colleagues, yes.

  Q6 Chairman: When we saw the Statistics Commission, they suggested to us that the code of practice you operate under is rather ambiguous and aspirational and the day to day interpretation of it can vary quite widely across government. Does that reflect your own experience?

  Ms Dunnell: The code of practice was revised, as you know, after National Statistics came into place in 2000 and some of it has been in use only for a couple of years. It is a code of practice in that it is guidance and I believe it probably needs a bit more time to settle down and for people to experience putting it into practice, but we do accept that there are areas which are probably difficult or ambiguous for people to interpret. One of the things I am going to be doing, starting soon after this week, is to visit all government departments and Chief Statisticians and get a bit more to grips with the problems that they are having with the code.

  Q7 Chairman: Thank you. I think my colleagues may well wish to pursue that. But finally, from me, may I ask you about the classification of PFI liability? It is something we discussed on many occasions with your predecessor, who wrote to the Financial Times in May this year saying that the timescale for the work of analysing all this is determined by the complexity of the statistical issues, and that, when all the necessary quality assurance has been completed, you will then release the figures in accordance with the relevant protocols. How is that work progressing in terms of calculating the debt associated with PFI contracts and when do you expect to complete it?

  Ms Dunnell: May I just say something generally about classifications, and then I will pass over to Colin? As you know, all of our classification decisions are taken, along with the rest of our national accounts work, in line with international guidelines and procedures and all this is done in a very rigorous and open fashion. However, we do, I think, feel now that we probably need to develop a protocol, part of the code which explains the whole process and the criteria and that we would then incorporate in our Annual Report where we have got to in the year, which ones we have done, which ones are under way and which ones we see coming up. The PFI is very complicated and Colin will tell you a bit more about the progress we are making on that.

  Q8 Chairman: It would appear, from that answer, that you rather agree that the classification should not be left as an internal process that has no particular timescale, that the public do need to be told what you are looking at and when you might expect to finish it.

  Ms Dunnell: Sometimes we know, because we scan the horizon, as it were, what things might be coming up, so we have some idea about what might be coming up. Colin will explain why some things take rather longer than others, but setting this out would probably be very helpful.

  Q9 Chairman: Colin?

  Mr Mowl: Just on that last point Chairman, there are two types of classification issue we consider. One is where there is a developing policy proposal, where we are typically invited by the Treasury, possibly on behalf of another department, to examine a particular proposal and give them an opinion and there is a service level agreement with the Treasury that covers that. The second type of classification issue is where we decide that we need to look at a particular organisation or transaction that has already happened, just to make sure that we have classified it correctly. So there are some where we respond to a Treasury invitation, some where we take our own initiative. As regards PFI, this is a very complex area. We have got quite good coverage in the National Accounts and Public Finances for most aspects of PFI but, as you rightly say, there should be an allowance in the government or public sector net debt figures for PFI. The reason this is a complex area is that there are, as I am sure you know, about 700 PFI schemes, each with its own individual characteristics. It is only the on-balance sheet schemes which should be covered in public sector net debt, and by on-balance sheet schemes I mean those that are accounted for in the Department's resource accounts and it is government accountants and the NAO that decide whether a scheme is on-balance sheet or off-balance sheet. With on-balance sheet schemes it is quite right that in principle there should be an allowance in the debt figures. The reason it is not entirely straightforward is this debt is not like any other government debt; it is not like conventional debt, a gilt-edged security; we cannot look at the debt instrument and read the value of the instrument from the piece of paper. This is a notional calculation. We have to impute a loan from the private sector partner to the Government. We then have to impute—this is a statistical term, which means we make an estimate; it is an estimate, rather than hard information—a loan in the first place; we then have to impute a profile of repayments, both capital repayments and interest. Now, previously there has not been an obvious data source, a direct data source, we could use for this. We have now, with government accountants, identified such a data source. We are going to make use of material that has been produced for the whole of government accounts. We have just started a programme of work and we expect to make some initial estimates by next summer. They will not cover all on-balance sheet PFI schemes, but they should cover, if this work is successful, a substantial proportion.

  Q10 Chairman: Fine. When will the protocol be available?

  Ms Dunnell: We will start working on it pretty soon.

  Q11 Lorely Burt: I want to talk about the issue of trust. Before I do, I just wanted to pick up Colin Mowl's point about the PFI off-balance sheet. I think Ms Dunnell's predecessor said that it would take about six months to get the PFI figures accounted on the balance sheet. I just wondered whether that is on target?

  Mr Mowl: Yes. Six months was the time we estimated, or judged, back in May, that we would need from when we established a method and a data source to completion of the work. We have only recently, in the last month or so, got to that stage, which is why we are saying, as a guide, that next summer is what we are aiming for, so perhaps a little more than six months from now but, from start to finish, six months; perhaps seven or eight. So we are still on that sort of track, but that was six months, not from May when we made that statement, but from when we established a method and a data source.

  Q12 Lorely Burt: Also, talking about on-balance sheets, on 27 May The Independent claimed that £21 billion of National Rail's debts would not go on the balance sheet, and that was done by re-classifying this as a private organisation. Could you comment on that?

  Mr Mowl: Yes. With respect to that newspaper, that is not a new story. This is a classification decision we announced in 2002 and, according to national accounts conventions and guidance, we judged that Network Rail was a private sector company because we judged that it was not under public sector control. We have kept that decision under review. If we get new information, we will look at it again, which is what we did, I think it was in February 2004 when we received some new information about the directors' remuneration scheme and, as a result, for a period of nine months we re-classified Network Rail as a public sector company. We are now looking at the consequences of the Railways Act 2005 which received Royal Assent in April, and if the Committee would like me to, I can summarise where we have got to, but we propose to write to the Committee fairly soon to inform you of our conclusions.  [1]

  Q13 Lorely Burt: The figures for 2005 show that only 17% of the respondents in your own survey believed that official figures are produced without political interference, and that only 14% believed that the Government uses official figures honestly. One of the examples of this that several people have raised was the endorsing of Mr Brown's change in the economic cycle and there is this thought that this was all behind closed doors. I just wonder whether you could comment about that. Have you set targets for increasing the trust that people have?

  Mr Mowl: I think there are two questions there. One was about the Treasury and the economic cycle, which I do not think was directly addressed in the survey you referred to. I do not think so, but I imagine Karen would want to respond to your question about the survey and the degree of public confidence.

  Ms Dunnell: Yes. I was very disappointed that the survey showed such a low level of trust. In fact it endorsed the findings of the first survey that we carried out last year, but we must look at it also in the context of other information that we have about the use and dependence of people on statistics. Nevertheless, one of the things I did in my first months in office was to meet with all my senior colleagues, the chief statisticians of other government departments, and we spent most of our meeting working out how to take forward some work with the aim of improving trust and we set up several groups to address five main areas where we think we can improve the situation.

  Q14 Lorely Burt: Thank you. I wanted to put it a bit wider now and talk about the wider public and their perception of national statistics. In fact, your later survey on public confidence found that trust was higher amongst those who thought statistics were an important basis for decision-making in society than amongst the wider society, if you like. How important do you think it is to increase trust amongst those who are not involved in using statistics?

  Ms Dunnell: I think it is very important because what we know, from schoolchildren upwards, is virtually everybody needs to understand statistics in order to get the most out of their lives and so we feel it is very important and we start with schoolchildren, by supporting the special web site we have, Stats for Schools, and that is very important because the earlier in people's education you can get them to appreciate statistics and how to use them and how to interpret them, the better. Also, one of these groups that I mentioned just now is going to look very carefully at what we can do to improve communication about statistics generally. So, for example, when we put out statistics, are they expressed in the clearest way? Is it clear why we collect them, why they are important, how you should interpret them and so on? We feel there is probably an awful lot more we could do as statisticians to help people to understand why something that we have produced is so important to the whole democratic process. That is what we want to be doing much more generally across the whole of society.

  Q15 Lorely Burt: Thank you. Finally, I just wanted to pick up on the trust of statistics again. Do you think that this very low figure is simply a problem of perception? Do you think there is a genuine problem of misrepresentation here?

  Ms Dunnell: I think it is perception, and one of the things, for example, is that you have somehow to distinguish between what people understand about the basic statistics that are produced, for example by the Government Statistical Service, and the interpretation that ministers, the media, charitable organisations or whoever put on them. Because we have such a huge range of statistics you can almost pick one to match your point and I think it is almost in the interpretation that the risk arises, which is why it is very important that we probably place more emphasis on our own interpretation.

  Q16 Lorely Burt: Do you think that is a route that you would want to go down, as well as producing the statistics, to increase the amount of interpretation that you can offer to the public as part of the service that you offer?

  Ms Dunnell: Yes, very much so and, indeed, that is the way that, particularly, the Office for National Statistics has been going and one of the main reasons for modernisation and efficiency is to make the collection process cheaper, to be able to spend more resource on interpretation so, for example, very well established products, like Social Trends, have been enormously successful in providing a coherent, comprehensive picture about what is changing in society. Another example—we have just produced a compendium of statistics about pensions which hopefully will have the same impact. It brings it all together and points up which kinds of things you need to look at from one point of view and which from the other. So we very much are trying to increase the amount of that kind of work that we do.

  Q17 Lorely Burt: I can see that will be a really useful way to try to reduce the amount of misrepresentation as well. Are there any other ways that you think you can stop the misrepresentation by media and politicians of national statistics?

  Ms Dunnell: One of the things that will be happening fairly shortly is a review of our Framework document and one of the things that will be reviewed in that is the whole issue of pre-release access to statistics because having pre-release access, of course, allows ministers and departments to prepare statements about the statistics in advance and that is possibly one of the areas where we might be able to get our interpretation in first.

  Lorely Burt: Thank you very much.

  Q18 Peter Viggers: I think I heard Mr Mowl say that there was a period during which it was thought that Network Rail was not under public control.

  Mr Mowl: That is correct.

  Q19 Peter Viggers: Whose control did you think it was under?

  Mr Mowl: The Government's, public sector control. The classification of whether an organisation is in the public or the private sector depends on whether the organisation is deemed to be under public sector control or not. A decision we announced in 2002, the original decision, was that Network Rail was under the control of the members, not of the government, and that is why it was classified as a private sector company. We subsequently discovered that, in the early days of Network Rail, the directors' remuneration scheme was influenced by the government in a way which it was not subsequently, and in a way which we were not aware of at the time we made our original decision. It was because of the difference in the directors' remuneration scheme where, for this nine-month figure I was talking about, that remuneration was influenced by the Strategic Rail Authority, which is an arm of Government, that led to this re-classification.

1   Ev 13, further correspondence is available on the ONS website, Back

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