Environmental Audit Committee - Green EconomyWritten evidence submitted by The Office for National Statistics Measuring National Well-being Programme

Summary

the Measuring National Well-being Programme, launched in November 2010, aims to develop a range of indicators of the progress of the UK, to complement GDP;

the vision of the Programme is to develop and publish an “accepted and trusted set of National Statistics which help people to understand and monitor national well-being in the UK”;

the Programme builds, in particular, on the work of the Commission for the Measurement of Economic Performance and Social Progress (CMEPSP) by focussing on: classical GDP issues, people’s quality of life, the environment and sustainability; and

this paper provides an overview of the Measuring National Well-being Programme and sets out the work plans for developing the well-being indicator set.

1. Background

1.1 Economic growth has long been considered an important goal of government policy. However, it has been recognised that to get a full picture of how the country is doing we need to look beyond GDP and consider how to measure national well-being and progress more widely.

1.2 The Commission for the Measurement of Economic Performance and Social Progress (CMEPSP), set up by President Sarkozy and led by Joseph Stigltiz, Amartya Sen and Jean-Paul Fitoussi, aimed to:

identify the limits of GDP as an indicator of economic performance and social progress;

consider additional information required for the production of a more relevant picture; and

discuss how to present this information in the most appropriate way.

1.3 The CMEPSP’s 2009 report argued that “what we measure affects what we do; and if our measurements are flawed, decisions may be distorted. Choices between promoting GDP and protecting the environment may be false choices, once environmental degradation is appropriately included in our measurement of economic performance.”

1.4 The CMEPSP’s report provides a useful starting point for the Measuring National Wellbeing (MNW) Programme due to its widely accepted status and international recognition. The report discusses:

the economy—focusing on consumption rather than production within the National Accounts framework, looking at income, expenditure and wealth at the household level and giving more prominence to the analysis of the distribution of income, consumption and wealth;

quality of life—which includes domains such as health, education, personal activities including work, political voice and governance, social connections and relationships as well as subjective well-being; and

the environment and sustainability—which includes clear indicators of our proximity to dangerous levels of environmental damage (such as those associated with climate change or the depletion of fishing stocks).

1.5 All three areas are connected and need to be looked at together to provide the fullest picture of national well-being.

2. The Measuring National Well-being Programme

2.1 The aim of the MNW Programme is to develop and publish an accepted and trusted set of National Statistics which help people to understand and monitor national well-being in the UK.

2.2 Well-being is a multi-dimensional concept and in order to understand how best to measure it a shared understanding of what it means needs to be developed. Between November 2010 and April 2011 ONS held a national debate in order to engage with experts on well-being, who would provide an insight into what to measure and how to measure it, and the general public, who not only know best about what matters to them but would also be affected by any policies that would result from this work.

2.3 ONS held 175 events involving 7,249 people. In addition, there was an online debate which achieved 26,755 responses bringing the total number of participants to 34,004. Debate responses have been used in developing a set of domains/indicators.

2.4 The MNW Programme is split into a number of phases:

phase one—national debate and development of subjective well-being questions—Nov 2010 to April 2011;

phase two—collection, analysis and publication of subjective well-being questions—on-going from April 2011, first annual publication 2012;

phase three—development of indicative national well-being measures—April 2011 to March 2012; and

phase four—regular publication, analysis and refinement of headline national well-being measures—April 2012 to March 2015.

2.5 The Programme is split into a number of projects and workstreams, the details of which are set out below:

3. Classical GDP issues

3.1 Work in this area builds on the following recommendations of the CMEPSP report:

when evaluating material well-being, look at income and consumption rather than production (recommendation 1);

emphasise the household perspective (recommendation 2);

consider income and consumption jointly with wealth (recommendation 3);

give more prominence to the distribution of income, consumption and wealth (recommendation 4); and

broaden income measures to non-market activities (recommendation 5).

3.2 ONS has already published a number of reports in this area. Chiripanhura (2010) presented analysis of the well-being implications of alternative National Accounts aggregates (other than GDP) and looked at the differences between mean and median income arguing that median analysis gives a better indication of the level of economic well-being of the “typical” household as the income distribution is positively skewed (Chiripanhura, 2011). ONS has also developed estimates of the UK’s stock of human capital1 by applying a lifetime labour income methodology to data from the UK Labour Force Survey (Jones and Chiripanhura, 2010). ONS (2011a) set out a review of ONS’s work on social capital and the availability of the measures of social capital.2

4. Quality of life

4 1 The term “quality of life” can be split into a number of domains. Recommendation 7 of the CMEPSP report stated that “quality of life also depends on people’s objective conditions and capabilities. Steps should be taken to improve measures of people’s health, education, personal activities, political voice, social connections, environmental conditions and insecurity.”

4.2 The project aims to establish a clear framework for reporting on national wellbeing, consistent with the National Statistician’s report on the National Debate (ONS, 2011b) and international guidance, with appropriate domains and dimensions and establish a limited number of key indicators of national well-being, demonstrating value to users, statistical validity and relevance, and agreeing appropriate data sources from inside and outside ONS. A consultation paper was published in October 20113 with an initial set of well-being domains and indicators.

4.3 The CMEPSP report also recommended that “statistical offices should incorporate questions to capture people’s life evaluations, hedonic experiences and priorities in their own survey” (recommendation 6).

4.4 In recognition of the lack of official statistics on subjective well-being in the UK ONS introduced four experimental monitoring questions to the Integrated Household Survey (INS) in April 2011. This will enable the production of annual estimates of subjective wellbeing, not only for the UK as a whole but also for smaller geographies and sub-groups of the population. The estimates generated will be experimental in the first instance, further testing and development is planned. The first annual experimental statistics will be available in summer 2012.

4.5 The questions included in the INS are:

Overall, how satisfied are you with your life nowadays? (on a scale of 0-10, where 0 is not at all satisfied and 10 is completely satisfied).

Overall, how happy did you feel yesterday? (on a scale of 0-10, where 0 is not at all satisfied and 10 is completely satisfied).

Overall, how anxious did you feel yesterday? (on a scale of 0-10, where 0 is not at all anxious and 10 is completely anxious).

Overall, to what extent do you feel the things you do in your life are worthwhile? (on a scale of 0-10, where 0 is not at all worthwhile and 10 is completely worthwhile).

4.6 The project aims to:

produce high quality National Statistics estimates of subjective well-being;

influence the international agenda on the development of subjective measures by working with stakeholders on the OECD handbook and the well-being module for EU-SILC; and

encourage harmonisation of questions on other ONS/GSS surveys so that they can be used in policy formulation and appraisal as well as overall monitoring of national well-being in the UK.

4.7 Further CMEPSP recommendations in this area include:

quality-of-life indicators in all the dimensions covered should assess inequalities in a comprehensive way (recommendation 8);

surveys should be designed to assess the links between various quality of life domains for each person, and this information should be used when designing policies in various fields (recommendation 9); and

statistical offices should provide the information needed to aggregate across qualityoflife dimensions, allowing the construction of different indexes (recommendation 10)

5. The environment and sustainability

5.1 The CMEPSP report argued that “both current well-being and sustainability need to be measured. Sustainability poses the challenge of determining whether we can hope to see the current level of well-being at least maintained for future periods or future generations, or whether the most likely scenario is that it will decline...The assessment of sustainability is complementary to the question of current well-being or economic performance, and must be examined separately. Confusion may arise when one tries to combine current well-being and sustainability into a single indicator. To take an analogy, when driving a car, a meter that added up in one single number the current speed of the vehicle and the remaining level of gasoline would not be of any help to the driver. Both pieces of information are critical and need to be displayed in distinct, clearly visible areas of the dashboard.”

5.2 The CMEPSP recommendations in this area were that:

sustainability assessment requires a well-identified dashboard of indicators.The distinctive feature of the components of this dashboard should be that they are interpretable as variations of some underlying “stocks” (recommendation 11).

a monetary index of sustainability has its place in such a dashboard but, under the current state of the art, it should remain essentially focused on economic aspects of sustainability (recommendation 12).

the environmental aspects of sustainability deserve a separate follow-up based on a well-chosen set of physical indicators. In particular there is a need for a clear indicator of our proximity to dangerous levels of environmental damage (such as associated with climate change or the depletion of fishing stocks) (recommendation 13).

5.3 The CMEPSP report also listed a number of potential measures including: the Environmental Sustainability Index (ESI), the Environmental Performance Index (EPI), the System of Environmental-Economic Accounting (SEEA), Adjusted Net Savings (ANS), the Ecological Footprint (EF) or Carbon Footprint (CF).

5.4 Both classical GDP issues and environmental sustainability both have a strong connection to the National Accounts framework and the ‘stocks’ approach to measuring sustainability outlined in the CMEPSP report and promoted by the Social Impacts Task Force in the UK. Sustainability does not refer only to the environment and natural capital but also to social, human and economic capital.

5.5 Reference has already been made to the work on social, human and economic capital earlier in this report. Focusing on environmental sustainability, ONS is taking forward a full programme of work to follow up on the CMEPSP recommendations.

5.6 Before detailing the work programme, it is important to note that ONS recognises the synergy with the commitments of the Natural Environment White Paper (Defra, 2011) and the CMEPSP recommendations as regards a “stocks” approach to sustainability and the valuation of Natural Capital. The National Statistician has asked ONS and Defra statisticians to work together to deliver on the common goals.

5.7 The Natural Environment White Paper made the following commitment, reflecting targets for the period 2011-2010 set out by the parties to the Convention for Biological Diversity in Nagoya:

“We will put natural capital at the heart of Government accounting. We will work with the Office for National Statistics to fully include natural capital in the UK Environmental Accounts, with early changes by 2013. In 2012 we will publish a roadmap for further improvements up to 2020.”

Natural Environment White Paper (NEWP), June 2011

5.8 The NEWP builds on this to say:

“We will put natural capital at the centre of economic thinking and at the heart of how we measure economic progress nationally”.

“...we must account nationally for our natural capital. Economic gains and losses resulting from natural capital ought to be properly recorded. This includes changes to the value of physical environmental assets, such as fish stocks or forests, and also to the value of natural services provided by a healthy ecosystem, such as insect-borne pollination of crops. The Government will take action to capture the value of natural capital on the nation’s balance sheet. In doing so, we will end the situation where gains and losses in the value of natural capital go unrecorded and unnoticed.”

“Over time we will move from measuring the value of physical stocks to systematically valuing the services they provide. Further research will be undertaken to do this based on the results of the National Ecosystem Assessment.”

“We will also strengthen international efforts to value natural capital, including it in the agreed international standards for producing national accounts. We will contribute to the update of the UN’s System of Integrated Environmental and Economic Accounting. We will also support the World Bank’s Global Partnership for Wealth Accounting and the Valuation of Ecosystem Services (WAVES), which will look at the feasibility of including changes in the value of ecosystem services in measures of economic performance”.

<?oasys [pf10p0] ?>5.9 Taking into account the CMEPSP recommendations and the NEWP commitments, the Measuring National Well-being programme aim to deliver the following:

continuous development of the annual UK Environmental Accounts4 in line with European Regulation on Environmental Economic Accounting5 and international statistical standards;

implementation of the NEWP commitment for the Office for National Statistics to fully include natural capital in the UK Environmental Accounts, with early changes by 2013 and publishing a roadmap in 2012 for further improvements up to 2020. The timing of Rio+20 is understood and efforts will be made to publish early work on the Roadmap but resource limitations and the need to consult widely mean a final Roadmap will be delivered later in the year. In support of this work, ONS is about to issue invitations for an expert and user engagement group which will primarily be managed on-line, supplemented by small meetings and seminars;

full contribution to the development of the Central Framework of the UN System of Environmental Economic Accounting (SEEA)6 which it is anticipated will be adopted as an international standard to sit alongside the System of National Accounts in February 2012. ONS and Defra have contributed to expert groups on the SEEA and SEEA-Energy;

full contribution to the development of SEEA experimental ecosystem accounts. ONS and Defra will jointly host an international expert meeting convened by the UN, World Bank and European Environment Agency in December 2011 to examine the issues;

delivery of a feasibility study to measure the Environmental Goods and Services Sector in line with European and proposed SEEA methodology. Following consultation with potential users, ONS published an article in December 2010 outlining how these statistics might inform policy, in particular contributing to the evidence base for the green economy (Livesey, 2010); and

In September 2011, OECD approached Heads of Statistical Offices to support work at the national level to apply the OECD’s Towards Green Growth: Monitoring Progress Framework in the lead up to Rio+20 (OECD, 2011). ONS, in liaison with government statisticians from Defra, DECC and BIS will need to assess what can be achieved with the resources available.

6. International initiatives

6.1 There are a number of on-going international initiatives to measure well-being or progress which ONS is engaged with.

6.2 The Eurostat/INSEE Sponsorship Group was set up in 2010 to study the feasibility of the CMEPSP recommendations and is due to report to the European Statistical System Committee (ESSC) in November.

6.3 The UK is a partner in the ‘European Framework for Measuring Progress (e-frame)’ Project the objectives of which are to:

undertake a stocktaking of available results and of ongoing research activities on progress measurement;

foster a European debate over the issue;

define guidelines for the use of existing indicators;

propose a coherent way of “delivering” information including advanced ICT tools;

identify new research topics for future investigation; and

harmonize NSIs’ initiatives in measurement of progress measurement area.

6.4 The e-frame project involves a 19 partners-consortium, formed by major European National Statistical Institutes, universities, research centres, civil society and OECD.

6.5 The OECD’s Global Project ‘Measuring the Progress of Societies’ exists to foster the development of key economic, social and environmental indicators to provide a comprehensive picture of how the well-being of a society is evolving. It also seeks to encourage the use of indicators to inform and promote evidence-based decision-making, within and across the public, private and citizen sectors.

References

Chiripanhura, B (2010). Measures of economic activity and their implications for societal well-being. Available at www.ons.gov.uk/ons/rel/elmr/economic-and-labour-market-review/no--7--july-2010/index.html

Chiripanhura, B (2011). Median and mean income analyses: their implications for material living standards and national well–being. Available at www.ons.gov.uk/ons/rel/elmr/economic-and-labour-market-review/no--2--february-2011/economic---labour-market-review.pdf

CMEPSP (2009). Report by the Commission on the Measurement of Economic Performance and Social Progress. Available at www.stiglitz-sen-fitoussi.fr/documents/rapport_anglais.pdf

Defra (2011). Natural Environment White Paper. Available at www.defra.gov.uk/environment/natural/whitepaper/

Jones, R, and Chiripanhura, B (2010). Measuring the UK’s human capital stock. Available at www.ons.gov.uk/ons/rel/elmr/economic-and-labour-market-review/no--11--november-2010/measuring-the-uk-s-human-capital-stock.pdf

Livesey, D (2010). Measuring the Environmental Goods and Services Sector. Available at www.ons.gov.uk/ons/rel/elmr/economic-and-labour-market-review/no--12--december-2010/measuring-the-environmental-goods-and-services-sector.pdf

OECD (2011). Towards Green Growth: Monitoring Progress Framework. Available at www.oecd-ilibrary.org/environment/towards-green-growth-monitoring-progress/towards-an-oecd-set-of-green-growth-indicators_9789264111356-6-en

ONS (2011a). Social Capital Indicators Review. Available at www.ons.gov.uk/ons/rel/environmental/social-capital-indicators/review-paper/social-capital-indicators.html#tab-abstract

ONS (2011b). National Statistician’s report on the National Debate. Available at www.ons.gov.uk/ons/guide-method/user-guidance/well-being/wellbeing-knowledge-bank/understanding-wellbeing/measuring-what-matters--national-statistician-s-reflections-on-the-national-debate-on-measuring-national-well-being.pdf

21 November 2011

1 OECD defines human capital as “the knowledge, skills, competencies and attributes embodied in individuals that facilitate the creation of personal, social and economic well-being.” This is a broad definition, encompassing a range of attributes (such as knowledge, skills, competencies and health conditions) of individuals.

2 OECD defines social capital as “networks together with shared norms, values and understandings that facilitate co-operation within or among groups”.

3 www.ons.gov.uk/ons/about-ons/consultations/open-consultationsinneasuring-national-well-being/index.html

4 www.ons.gov.uk/ons/taxonomy/index.html?nsc1=Environmental+Accounts

5 http://eco.eurostatec.eurooa.eu/portal/page/oortal/environmental accounts/introduction

6 http://unstats.un.org/unsd/envaccounting/seea.asp

Prepared 18th May 2012