In January 2012, following a consultation exercise in 2011, ONS made changes to the way it makes National Accounts Classification decisions. These are decisions on the classification of bodies in the UK economy including whether a body is part of the public or private sector, and decisions on how to record transactions that take place in the economy. These decisions are made in line with internationally agreed guidance and rules set out principally in the European System of Accounts 1995 (ESA 95),
Following comments from key stakeholders we have undertaken a review of the process and are now planning to make some further changes to improve the transparency of the process and the decisions reached as well as improving timeliness of decision-making.
The changes are in five main areas:
• Greater Transparency about what triggers a classification review
• More information on the current caseload
• More detailed explanation of classification decisions
• Faster implementation of decisions in key statistics
• Changes in how classification decisions are authorised
ONS makes a large number of classification decisions in a year, while most of these decisions involve new bodies or new transactions, some decisions result in the reclassification of existing bodies or a change in the way existing transactions are treated. At the moment the published ONS Classification Process states that:
28. There is no systematic review of classification decisions. However, ONS will review earlier decisions if new information has come to light, circumstances have changed or interpretation of international guidelines has evolved. Such reviews are conducted following the same process as for other classification decisions. If a review results in a different decision, that is a reclassification, time series for the National Accounts and public sector finances will be revised accordingly.
Stakeholders have asked for more clarity about when ONS will review existing classifications, and therefore we propose replacing the existing paragraph with the following text:
28. ONS will review existing decisions under the following circumstances:
- When new legislation, policy decisions or machinery of Government changes impact on the operation of an organisation or on the flows of money to, from or within Government;
- When there are other changes to the operation of a body which impact on the classification decision;
- For public corporations, we will review whether the body passes the “market test“ (i.e. is mainly funded by sales of goods and services, rather than taxes or grants) at least every three years in line with European guidance
- When changes to Eurostat guidance mean that large or specific classification decisions must be reviewed immediately to ensure they are still compliant;
- For decisions which have sizeable impacts (more than £1bn impact on deficit or £10bn impact on debt) then cases which haven’t been reviewed for one of the reasons above will be reviewed (Post classification reviews) after 5 years;
ONS may from time-to-time review cases for reasons not mentioned above if there is a need for reassurance that nothing has changed which may impact on the classification decision.”
For new cases ONS will explicitly prioritise the cases according to the size of the impacts from a case, Eurostat priorities and whether the case is likely to be used to set other precedents within the policy-making environment. This does not mean that other cases will not be done but that these types of cases will take precedence.
Post classification reviews have been added to ensure that there is an ongoing process of review for these important changes which ensure that if changes have happened (either to guidance or in the operation of a body) which have not previously been notified to or considered by the National Accounts Classification Committee that there is an automatic review point after 5 years to ensure the quality of the classification process is maintained over time.
Stakeholders have also told us that they would like more information on classification cases ONS plan to consider in the short, medium and longer term. Consequently, beginning in September 2013 and then updated quarterly ONS will publish a forward looking, prioritised classification workplan including target completion dates for classification decisions.
A major area of work for ONS in the next 12 months will be changes arising from the updating of the main international manuals that the National Accounts are based upon. The National Accounts in the UK are currently based on the European System of Accounts 1995 (ESA 95), but in September 2014 they will move to a European System of Accounts 2010 (ESA 10) basis.
Consequently a major part of the workload for the next 12 months will be cases directly arising from the changes in these rules.
More Information on Classification Decisions
The majority of classification decisions are announced each month in the “National Accounts Sector Classification – Classification Update”, which is published on the last working day of each month. This provides a short description of the body or transaction classified and a brief rationale.
More major classification decisions with a significant impact on our published statistics will often be explained in a more detailed article. However some stakeholders have suggested it might be useful for more detailed explanations to be provided for more classification decisions, especially where, though the impact may be small, there is an important precedent being set.
Consequently we are exploring ways of adding additional detail and greater explanation to decisions in the monthly update.
Faster Implementation of Classification Decisions
Finally, a number of stakeholders have asked ONS to work harder at reducing the time between classification decisions being made, and implementation in National Accounts, Public Sector Finances and other statistics.
Although some of this is due to restrictions on when decisions can be implemented, part of the delay is due to the process by which work on implementation only starts with the decision being made. In future ONS plans to commence work on implementing decisions in parallel with the classification casework, to enable decisions to either be more quickly implemented or for it to be clearer about when a particular decision will be implemented.
Changes to Authorisation of Decisions
Under our current classification process, major classification decisions would be shared with the National Statistician before publication. Major Classification cases are authorised by the Executive Director of Collection and Production following consultation with the National Accounts Classification Committee and the Director General of the Office for National Statistics. These changes clarify the role of the DG ONS in the process.
Key decisions will continue to follow consultation with the National Accounts Classification Committee (NACC) and more information about the committee and its current membership can be found here The National Accounts Classification Committee (NACC)with additional outside expertise if required invited by the Chair of NACC.
Implementation of the review
We are implementing the conclusions of the Review from the end of August. However we always welcome feedback on the Classification process.
If you have any comments on classification issues please contact:
Branch Head – NA Classifications
Office for National Statistics
South Wales NP10 8XG
Tel: 01633 455805
Details of the policy governing the release of new data are available by visiting www.statisticsauthority.gov.uk/assessment/code-of-practice/index.html or from the Media Relations Office email: firstname.lastname@example.org