Letter to David Rhind from Colin Mowl regarding Bill Martin's views on the state of the National Accounts as published in the Financial Times on 23 February 2007
Issue date: 23 February 2007
23 February 2007
Bill Martin's views on the state of the National Accounts (Financial Times 23 February)
I am writing, in Karen Dunnell's absence, about the column by Bill Martin in today's Financial Times about the quality of the National Accounts. The column coincides with publication today of ONS's plans for modernising the National Accounts, about which Karen wrote to you yesterday.
Bill Martin focuses on the quality of one aspect of the National Accounts only, namely the quality of the historic sector accounts before 1987. What Mr Martin says about these is correct in some respects. The quality of the sector accounts as a whole before 1987 is unsatisfactory, as we have acknowledged in correspondence with him. But it may not be clear from Mr Martin's piece that there is no quality problem over this period with key indicators which form part of the sector accounts, such as the household saving ratio, sectoral net lending and no problem with the comprehensive public sector and balance of payments accounts. Estimates of these indicators go back on a consistent basis to 1963.
Nor is there any quality problem with historic estimates of GDP and its components. While Mr Martin quotes an unnamed ONS source as saying that the problems concern "non-GDP figures", the headline and other comments in the article imply that the problems go much wider. This is very disappointing and undermines Mr Martin's legitimate concerns about the accuracy and continuity of some figures before 1987. Nor is there any justification for, or substantiation, of the statement that "every quarterly release is a voyage into an undiscovered country of cock-up".
It is particularly disappointing that the article chooses to make a link between this particular issue and Bill McLennan's views on the Government's proposals for independence of the ONS. I can see no link at all between proposals which relate to the future governance arrangements for official statistics and a particular quality issue which has its origins in the introduction of a new European System of Accounts in 1998.
The ONS attaches very high priority to maintaining and improving the quality of the National Accounts. We are making a substantial investment in improving quality. As noted in Karen's letter to you yesterday, this will deliver significant benefits to users in the form of improvements in quality which will address some long-standing deficiencies, which consolidating the position of the UK's National Accounts as among the best in the world. We stand by that assessment for reasons outlined in material published today.
Like all public organisations ONS has to make a judgement about priorities. This judgement is informed by consultations with users, in the case of the National Accounts particularly with the Treasury and Bank of England given their respective responsibilities for economic policy. Neither the Treasury nor the Bank has indicated that the issues raised by Mr Martin are a priority. Our aim is in due course, as modernisation proceeds, to address these issues but it will be several years before we can tidy up the historic accounts. We have explained this to Mr Martin.
In the meantime, it is important to retain a sense of perspective and balance, which Mr Martin's column in the Financial Times article fails to do.
Macroeconomics & Labour Market