1. Methodology background


 National Statistic   
 Survey name  Regional gross disposable household income QMI
 Frequency  Annual
 How compiled  Numerous data sources comprising both survey and administrative data
 Geographic coverage  UK (NUTS)
 Last revised  14 September 2016

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2. Overview

  • provides an overview of economic diversity and social welfare at regional, sub-regional and local area levels
  • regional gross disposable household income (GDHI) is produced for domestic purposes
  • regional net disposable household income (NDHI) is produced as a legal requirement of the European Union

Estimates are produced annually and are published in the Regional Gross Disposable Household Income (GDHI) Statistical Bulletin.

GDHI estimates cover the UK as a whole and are broken down according to the Nomenclature of Units for Territorial Statistics (NUTS).

GDHI is the amount of money that individuals have available for spending or saving. It is calculated gross of any deductions for the consumption of fixed capital.

Regional GDHI estimates are compiled at 3 levels of NUTS geography (regions, sub-regions and local areas). The estimates are on a residence basis: the incomes of individuals are allocated to the region in which they live.

The annual provision of regional and sub-regional NDHI at NUTS2 level (sub-regions) is an EU requirement. The estimates of NDHI are net of consumption of fixed capital. The UK regards gross estimates as a more meaningful indicator.

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3. Executive summary

The production of regional net disposable household income (NDHI) is a legal requirement of the European Union (EU). Estimates are compiled in compliance with the European System of Accounts 2010 (ESA 2010) and are consistent with the standards set out in the United Nations System of National Accounts 2008 (SNA 2008).

We publish regional gross disposable household income (GDHI) for domestic purposes. NDHI estimates are delivered to Eurostat. The availability of appropriate data sources for the regionalisation of fixed capital consumption varies between EU member states; however, the UK regards gross estimates to be a more meaningful indicator.

GDHI is the amount of money that individuals (that is, the household sector) have available for spending or saving. This is money left after expenditure associated with income, for example, taxes and social contributions. It is calculated gross of any deductions for capital consumption.

The GDHI estimates cover the UK as a whole and are broken down to Nomenclature of Units for Territorial Statistics (NUTS). NUTS is a hierarchical classification of spatial units that provides a breakdown of the EU’s territory for producing regional statistics that are comparable across the EU. Regional GDHI estimates are compiled at three levels of NUTS geography:

  • NUTS1: 12 regions – Wales, Scotland, Northern Ireland and the nine English regions; can be collectively referred to as regions
  • NUTS2: 40 regions – mainly groups of counties and unitary authorities; can be referred to as sub-regions
  • NUTS3: 173 regions – principally individual counties and unitary authorities; also known as local areas

National totals are allocated to regions using the most appropriate available regional indicators. A regional indicator is a dataset that provides data for calculating regional proportions, which in turn are used to allocate national totals. They can be acquired from administrative sources and structural business surveys. The national totals are consistent with those in the latest published UK National Accounts (Blue Book).

Estimates are produced each spring and are disseminated on our website in the form of a statistical bulletin. The regional GDHI statistical bulletin can be downloaded free from our website at 9.30am on the day of publication.. Estimates of NDHI are delivered to Eurostat via transmission templates.

Methods and terminology used in the production of GDHI can be obtained from the following publications:

This Quality and Methodology Information report contains the following sections:

  • Output quality
  • About the output
  • How the output is created
  • Validation and quality assurance
  • Coherence and comparability
  • Concepts and definitions
  • Other information, relating to quality trade-offs and user needs
  • Sources for further information or advice
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4. Output quality

This report provides a range of information that describes the quality of the data and details any points that should be noted when using the output.

We have developed Guidelines for measuring statistical quality; these are based upon the five European Statistical System (ESS) quality dimensions. This report addresses these quality dimensions and other important quality characteristics, which are:

  • relevance
  • timeliness and punctuality
  • accuracy
  • coherence and comparability
  • output quality trade-offs
  • assessment of user needs and perceptions
  • accessibility and clarity

More information is provided about these quality dimensions in the following sections.

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5. About the output

Relevance

(The degree to which the statistical outputs meet users’ needs).

User needs

Current price estimates are published for the variables total gross disposable household income (GDHI), GDHI per head of population and GDHI per head indices for the Nomenclature of Units for Territorial Statistics (NUTS) regions (at NUTS1, NUTS2 and NUTS3 levels). GDHI per head of population is a useful way of comparing areas of different sizes and is an important indicator. It is calculated using the entire resident population of an area (including the economically inactive).

The annual provision of regional and sub-regional net disposable household income (NDHI) at NUTS2 level is an EU requirement. The statistical body of the EU, Eurostat, collates regional NDHI from all member states.

Regional GDHI estimates are published annually, approximately 15 months after the latest year of published data and are consistent with the previous year’s UK National Accounts. Component level details are published at a NUTS1, NUTS2 and NUTS3 level.

These statistics provide an overview of economic diversity and social welfare at regional, sub- regional and local area levels. They supply information about the availability of disposable income throughout the UK. Disposable income is a concept that can be used to approximate the “material welfare” within the household sector, although the term “welfare” is commonly used in ways that go beyond financial wealth and, as such, cannot be measured by a single statistic.

These estimates are used by the UK Government and the devolved administrations of Northern Ireland, Scotland and Wales, to formulate and monitor economic policy and allocate resources.

The Scottish Government use these statistics as the basis for quarterly estimates of GDHI and the households and non-profit institutions serving households (NPISH) sector savings ratio within the Quarterly National Accounts Scotland release. The resulting statistics are widely used by economic commentators and academics in Scotland. The Scottish Government also use GDHI as one of a range of important economic indicators of economic performance, for example, in Scotland's Economic Strategy (March 2015).

In Wales, the Well-being of Future Generations (Wales) Act 2015 was introduced to improve the social, economic, environmental and cultural well-being of Wales. The Act puts in place seven well-being goals for Wales. These are for a more equal, prosperous, resilient, healthier and globally responsible Wales, with cohesive communities and a vibrant culture and thriving Welsh language. One of the indicators used to monitor progress is GDHI per head. As an indicator under the Act it must be referred to in the analyses of local well-being produced by public services boards when they are analysing the state of economic, social, environmental and cultural well-being in their areas. In addition, GDHI and primary income are also indicators used in Welsh Economy in Numbers, a publication on the Welsh Government website, which monitors important indicators of the Welsh economy.

The Northern Ireland Executive uses these statistics in conjunction with other economic measures and surveys to give an overall picture of the economy.

Local authorities use these statistics to facilitate evidence-based policy-making. These statistics inform the general public and provide insight into the relative socio-economic picture of the UK and issues such as the "North-South divide”. They are used in the House of Commons library to answer enquiries from MPs about regional differences in the income of households.

The EU uses these estimates to inform regional policy and analysis, monitoring the development of regional disposable income of households in conjunction with final consumption expenditure (the individual consumption of households) and savings, to identify disparities in regional welfare.

Reviews and changes

Previous published estimates of regional GDHI included headline data that had been smoothed to remove volatility, with raw (unsmoothed) estimates also provided. Some users commented that they found raw estimates more useful and, following on from the ONS Methodological Review of Smoothing and Commuting Adjustments in Regional Accounts, only raw data are published from 2013 onwards.

From 1 January 2015, GDHI estimates are published using the new NUTS boundaries from the 2013 review (see “Concepts and definitions” section for more information).

The UK, along with all other EU member states, has a programme of work to introduce the changes to data and methods required by the new European System of Accounts (ESA 2010). There was one ESA 2010 change in Blue Book 2015 that affected GDHI. The change was to reflect cross-border property income (CBPI) relating to the ownership of second homes, including those in the UK owned by foreign nationals and those owned by UK residents but located in other countries.

The activity has two components: property income (import and export) and housing services (import and export); which feature in both regional gross value added (GVA) and gross disposable household income (GDHI) as a part of rental income. Regional GDHI is only affected by the element of second homes abroad by UK residents. For the regional allocation of this, data from Council Tax records and the 2001 and 2011 Censuses have been used, with gaps in coverage filled by modelling using overall housing stock. This is consistent with the method used to regionalise CBPI in regional GVA.

Main data sources

Numerous data sources are used in the production of regional GDHI to estimate the distribution of income across the UK. These comprise both survey and administrative data, which conform as far as possible to those recommended in the Manual on regional accounts methods, a guideline document published by Eurostat, and represent the most appropriate data sources available.

The main data sources for GDHI are:

The UK GDHI estimates are constrained to the UK Blue Book totals for GDHI (as given in Table 6.1.4 of the Blue Book).

Timeliness and punctuality

(Timeliness refers to the lapse of time between publication and the period to which the data refer. Punctuality refers to the gap between planned and actual publication dates.)

Regional GDHI estimates are constrained to national totals and are published 6 to 9 months after the UK National Accounts Blue Book. The availability of important datasets in the production process is a factor in the publication timetable, for example, HMRC SPI data become available 14 months after the reference period. Regional GDHI estimates have never missed publication deadlines due to data availability or any other factors.

Provisional estimates of regional GDHI at NUTS1, NUTS2 and NUTS3 levels are published around 15 months after the end of the reference period.

For more details on related releases, the GOV.UK release calendar is available online and provides 12 months’ advance notice of release dates. In the unlikely event of a change to the pre-announced release schedule, public attention will be drawn to the change and the reasons for the change will be explained fully at the same time, as set out in the Code of Practice for Official Statistics.

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6. How the output is created

The production of regional Nomenclature of Units for Territorial Statistics (NUTS2) net disposable household income (NDHI) is a legal requirement of the European Commission.

As Figure 1.1 in the related downloads section shows, data are collated from both external and internal sources. Regional gross disposable household income (GDHI) estimates are then constrained to the UK GDHI total, as given in Table 6.1.4 of the Blue Book.

A "top down” approach is used to calculate regional figures, whereby the national aggregate is allocated to regions using the most appropriate indicator available. This is done at NUTS3 level because much of the data are supplied at this level. These NUTS3 estimates are then aggregated up to obtain NUTS2 and NUTS1 level estimates. These estimates are on a residence basis, that is, incomes of individuals are allocated to the region in which they live.

As GDHI uses data from different external sources, each individual dataset is formatted (please see Figure 1.2 in the related downloads section for more detail). This includes reorganising data tables to match the Statistical Analysis System (SAS) format (calendar year values, in pounds millions), so that data match published UK totals. Liaison with data providers is essential to clarify the format of delivered data, as well as explaining genuine movements in data, to match external outputs from sub-national administrations and improve the methodology of outputs.

Once collated and formatted, the data are analysed and quality assured. This includes data validation, creating and refining analysis tools and analysis. To ensure optimum quality of analysis, a dataset is checked by all members of the production team and any further tool creation, for example, growth proportions, validation or analysis is conducted (see Figure 1.2 in the related downloads section for more detail).

The objective of the validation of data process is to improve the quality of input data. It includes the calculation of outlier criteria for individual datasets. This often requires analysis tools to be calculated, such as growth rates or standard deviations. Once suitable criteria have been identified, the outliers are identified and removed when appropriate.

National controls

National aggregates (national control totals) are split and allocated to regions using appropriate regional indicators. The control totals are consistent with those in the latest published UK National Accounts.

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7. Validation and quality assurance

(The degree of closeness between an estimate and the true value.)

Accuracy

As the regional gross disposable household income (GDHI) estimates are constrained to the Blue Book totals, the accuracy of the regional GDHI estimates is dependent on the quality of the Blue Book UK GDHI estimates. Below the UK level, NUTS1, NUTS2 and NUTS3 estimates are constrained to the UK totals.

As stated in the previous section, liaison with data suppliers ensures unusual movements in datasets are queried (see Figure 1.1 in the related downloads section for more detail). This allows us to maintain accuracy standards within the source data and improve the quality of our finalised outputs.

Once received, the datasets are formatted (see Figure 1.2 in the related downloads section). The various data providers each present the data in different formats; as discussed in the previous section, these are standardised before validation or analysis. Errors may arise from formatting issues, errors in data transfers or communication, or human error within the formatting process. As with all stages of analysis and quality assurance, consistent checking by production staff is essential and is the main form of error identification.

Sample sizes can vary from 100% (HM Revenue and Customs Self-Assessment data) to 1% (HMRC Pay-As-You-Earn (PAYE) data). These variations are unavoidable in the collation of reliable time series data for the calculation of GDHI. Improvements in the GDHI methodology or changes in administrative source data allow for reviewing the available sources for higher quality datasets or more timely publications. This is an ad hoc and continuous process that does not include major revisions to the methodology of GDHI.

The vast majority of source data are updated annually; however, some datasets are published biennially, or on an ad hoc basis. . As with sample size, potential improvements to the methodology are reviewed whenever new data become available or when significant changes to the source data affect the final values. Where no recent estimate is available, the previous year’s data may be used (for imputation of missing data points please see the “How the output is created” section). It is important to note, however, that these issues are rare due to the completeness of the main source data.

The peer review process

The output variables for publication are subject to rigorous scrutiny, including looking at growth and shares, graphical depictions and comparisons with previous data. These data are then sent for peer review. Resulting queries are investigated and rectified where necessary. Feedback from this process is documented and any actions implemented within the results.

The regional accounts team has developed links with the peer reviewer network. This includes the devolved administrations of Northern Ireland, Scotland and Wales, HM Treasury, Department for Business, Energy and Industrial Strategy (BEIS), the ONS London regional presence at the Greater London Authority, and an ONS economist. Regular dialogue has resulted in significant refinements to the peer review process. Regional intelligence is shared and we are able to keep peer reviewers informed of any significant developments.

Revisions

As with the national accounts, regional, sub-regional and local GDHI estimates are calculated as reliably as possible. There is no easy way to measure the reliability of the estimates but we carry out consistency checks on data inputs, apply methods consistently and make use of local knowledge about each region. The estimates are partly based on sample surveys and the quality of the results varies according to sample size. This means that the results for smaller regions are subject to a greater degree of uncertainty than those for larger regions.

Figure 2 shows revisions to the 2013 NUTS1 estimates between the 2015 to 2016 publications. It shows both revisions made due to changes in national totals and revisions due to changes in the underlying data used to apportion the UK estimates.

The regional accounts revisions policy mirrors that of the Blue Book where national totals are subject to revision in “open” years. The whole time series is open to revisions from the Blue Book. In addition, revisions to the regional indicator datasets will affect the regional GDHI estimates.

It is important to note that there are other aspects of accuracy, which revisions analysis cannot attempt to measure. A value can be reliable (as in not revised) without being accurate.

Coherence and comparability

(Coherence is the degree to which data that are derived from different sources or methods, but refer to the same topic, are similar. Comparability is the degree to which data can be compared over time and domain, for example, geographic level.)

Department for Work and Pensions (DWP) produces two data sources that are similar to the GDHI release. The Family Resources Survey (FRS) collects information on the incomes and circumstances of private households in the UK, while the Households Below Average Income (HBAI) release is used to indicate living standards as determined by disposable income, changes in income patterns over time and income mobility. HBAI uses household disposable incomes, adjusted for household size and composition, as a proxy for the material living standards of individuals or, more precisely, for the level of consumption of goods and services that people could attain given the disposable income of the household in which they live. Neither the FRS nor the HBAI release are European System of Accounts (ESA) 2010 compliant. They also do not show information below NUTS1 level.

Data are available on a consistent basis back to 1997.

Since international standards such as ESA 2010 are used in the production of the regional accounts, the figures should be directly comparable with the regional accounts of other EU countries. However, the revisions policies of these countries should be examined before comparing data for back periods.

The GDHI estimates are benchmarked to the UK Blue Book totals for gross disposable household income and are consistent with Table 6.1.4 of the Blue Book.

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8. Concepts and definitions

(Concepts and definitions describe the legislation governing the output, and a description of the classifications used in the output.)

Regional gross disposable household income (GDHI) is a legal requirement under EU law and supplied to Eurostat consistent with the standards set out in the European System of Accounts (ESA) 2010. GDHI estimates are produced at current prices, which do not allow for inflation.

The GDHI estimates cover the UK as a whole and are broken down to Nomenclature of Units for Territorial Statistics (NUTS). NUTS is a hierarchical classification of spatial units that provides a breakdown of the EU’s territory for producing regional statistics, which are comparable across the EU. Regional GDHI estimates are compiled at three levels of NUTS geography:

  • NUTS1: 12 regions – Wales, Scotland, Northern Ireland and the nine English regions; can be collectively referred to as regions
  • NUTS2: 40 regions – mainly groups of counties and unitary authorities; can be referred to as sub-regions
  • NUTS3: 173 regions – principally individual counties and unitary authorities; also known as local areas

Household disposable income is defined as the sum of the balances of primary and secondary incomes (resources less uses) and represents the amount available to the household sector for spending on consumption or saving. This is shown in the following equation:

GDHI equals balance of primary income plus balance of secondary income

Primary incomes are the result of individuals’ participation in the production process, for example, as employees providing labour or through the ownership of assets and/or from self-employment. Secondary incomes are received as the result of redistribution of income, for example, pensions and benefits.

Outgoings, or uses, of the household sector are also classified as either primary or secondary. Primary uses consist of property income paid, that is, rent on land and interest paid on mortgages and other borrowing. Secondary uses are mainly non-discretionary payments, that is, taxes and social contributions to National Insurance.

Deriving net disposable household income for Eurostat

The production of regional disposable income of households is a legal requirement under ESA 2010. Whereas GDHI is compiled for UK domestic use, the estimates provided to Eurostat (the statistical department of the European Commission) are net of consumption of fixed capital at the NUTS2 level. Consumption of fixed capital (CFC) is included in the operating surplus and mixed income (OS and MI) components of the primary income account. The CFC element is estimated and deducted from the regional OS and MI, to derive the net disposable household income (NDHI) estimates.

EU member states provide estimates of NDHI in their national currencies. Eurostat converts these using specific purchasing power standards for final consumption expenditure (purchasing power consumption standards). This process enables meaningful comparisons to be made between the member states. The EU uses these NDHI estimates to inform regional policy.

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9. Other information

Output quality trade-offs

(Trade-offs are the extent to which different dimensions of quality are balanced against each other.)

As previously stated in the “Relevance” section, regional gross disposable household income (GDHI) estimates are published for the years 1997 to the year ending 15 months before the date of publication. Component level details are published for the Nomenclature of Units for Territorial Statistics (NUTS) regions (at NUTS1, NUTS2 and NUTS3 levels). This is to allow the data to be constrained to the previously published national GDHI figures.

Further information on release dates is contained in the “Timeliness and punctuality” section of this report.

Assessment of user needs and perceptions

(The processes for finding out about uses and users, and their views on the statistical products.)

In July 2011, the UK Regional Accounts team met with Eurostat as part of a quality initiative aimed at encouraging harmonisation of compilation methods for regional statistics. Regional accounts have participated in a Eurostat task force of member states, to develop a regional accounts methodology manual, which is now complete and published. The team regularly communicates with Eurostat.

The Regional Accounts team has developed links with the devolved administrations of Northern Ireland, Scotland and Wales, the ONS London regional presence stationed at the Greater London Authority (GLA) and an ONS economist. As previously mentioned, these are the main domestic users of the regional gross value added (GVA) statistics. Regional accounts generally meet these users on an annual basis to share views on methodology and ongoing developments.

A Regional Accounts Government User Group (RAGUG) is held twice a year to discuss the needs of stakeholders in the devolved administrations and other government departments. At the last meeting of the group, held in February 2016, the developments being undertaken by the regional accounts team were discussed. A paper titled Supporting devolution: developments in regional and local statistics has been published, which provides details of these developments.

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10. Sources for further information or advice

Accessibility and clarity

(Accessibility is the ease with which users are able to access the data, also reflecting the format in which the data are available and the availability of supporting information. Clarity refers to the quality and sufficiency of the release details, illustrations and accompanying advice.)

The Gross disposable household income statistical bulletin and the ONS Data Explorer tool make available datasets for download after 9.30am on the day of publication.

UK Government policy on pre-release of data allows a list of agreed officials to have access to data 24 hours before publication.

The GDHI statistical bulletin conforms to the standards set out in the Code of Practice for Official Statistics for the protocol on release practices.

For queries on the regional GDHI series, compilation methods, quality information or if you are experiencing difficulties in finding the latest figures, contact the Regional Accounts team by email at regionalaccounts@ons.gsi.gov.uk or by telephone on +44 (0)1633 456878.

Our recommended format for accessible content is a combination of HTML web pages for narrative, charts and graphs, with data being provided in usable formats such as CSV and Excel files. We also offer users the option to download the narrative in PDF format. In some instances other software may be used, or may be available on request. Available formats for content published on our website but not produced by us, or referenced on our website but stored elsewhere, may vary. For further information please contact us via email at regionalaccounts@ons.gsi.gov.uk.

Useful links

More information regarding conditions of access to data is available:

In addition to this Quality and Methodology Information report, quality information relevant to each release is available in the “Quality and methodology” section of the relevant statistical bulletin.

Notice of any forthcoming major changes in methodology will be given within each statistical bulletin.

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Contact details for this Methodology