ONS gaffe could have had severe implications for the independence referendum

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Thursday, 09 January 2014 22:22

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  By Russell Bruce
 
During the final shopping and preparation days before Christmas the Office of National Statistics (ONS), now based at Newport in Wales, published a set of economic statistics showing growth estimates for the regions and nations of the UK.
 
For a period going back to1998, the new ONS data showed a growth rate for Scotland that was half that contained in official growth statistics produced by statisticians at the Scottish Government.

Economics Editor of the Financial Times, Chris Giles, realised that something was very strange and wrote that this new breakdown of UK growth data could potentially change ‘the balance of the independence debate’.

The ONS produces an enormous range of statistical data, but not a little of its output has been coming in for increasing criticism.  ONS published data usually comes with a kitemark to verify its quality as a ‘National Statistic’. 

Interestingly, or perhaps worryingly, this new ONS growth data did not have the kitemark.  Scottish Government published statistics are covered by the ONS brand and also receive the kitemark of quality assurance.

So how could both sets of data be right?  Either the Scottish Government figures were wrong or the ONS at Newport had got things wrong.

With the advantage of being a fulltime Economics Editor with an analytical mind, the Financial Times’ Chris Giles set about producing his own tables and analysis of the data presented for regional Gross Value Added (GVA) for the nations and regions of the UK.

In an article on 18th December headlined ONS admits gaffe on Scottish growth the FT reported that a spokesperson for the ONS had admitted its statisticians had not accounted for inflation correctly and said a new version of the tables ‘would soon be published’.

Newsnet Scotland readers will be interested to hear that the FT article also included a comment from Prof John McLaren of the Centre for Public Policy for Regions (CPPR).  The FT wrote:

John McLaren of the Centre for Public Policy for Regions said he welcomed efforts by the ONS to produce more detailed regional data but questioned why the experimental data had not been more carefully checked. He said there were some “very odd” features in the data – such as unfeasibly sharp falls in education and manufacturing activity – that meant its suggestion that overall Scottish growth had been overstated should be treated with great caution.

Now to be fair to the ONS, well a little, their report of regional GVA is described as ‘experimental’ and they clearly state that data from the devolved governments is more reliable and have national statistics’ status, which the ‘experimental’ data does not.

The ONS experimental data is summarised in the introduction published on 18th December, but you have to drill down to the footnotes to get the explanation that the experimental data for Scotland is less reliable than the National Statistics status datasets from the Scottish Government.

According to the ONS these experimental data tables were produced using a new methodology intended to bring UK submitted regional stats for NUTS1 and NUTS 2 more into line with that required by the EU. 

NUTS stands for Nomenclature of territorial units for statistics (Acronym from French nomenclature d’unités territoriales statistiques).

The EU gathers this information from all member states so that EU wide comparisons of economic performance can be made.

NUTS1 data
Is a breakdown of the economic performance of the 9 regions of England plus Wales, Scotland and Northern Ireland.

NUTS2 data
Is a further breakdown of UK regions and nations. The four NUTS2 breakdowns for Scotland are Eastern Scotland, SW Scotland, NE Scotland and Highlands and Islands

If fact the ONS have been producing NUTS1 and NUTS2 data for years.

Providing the data the EU gets is accurate, this is incredibly useful in making comparisons across the EU to see how Scotland and its four sub regions compare with both rUK and the other 26 EU members.

In the last NUTS2 rankings three areas of the UK were in the top 20 places for economic output per capita.  At number 1 is London, at number 14 was NE Scotland and scraping in at the tail of the top 20 was NUTS 2 area – Berkshire, Buckinghamshire and Oxfordshire.

Chris Giles of the FT could not get a clear explanation of why the experimental data was generated.  My research shows that the EU is trying to improve the harmonisation of data collation from member states and eradicate duplication e.g. in the compilation of the Eurostat Handbook of Quarterly National Accounts.

Was this what the ONS was working towards?

Unwilling to let go of a good story, Chris Giles did some further work on his blog posted on 20th December.  In a reply to a comment on his blog, Giles wrote “I think it is more likely to show thumbs up for the Scottish govt. That only raises even more questions about ONS data”.

This does not explain how the ONS datasets managed to lose around half Scotland’s economic growth in the period 1998 to 2011 or why red lights did not flash when the data produced by the model was at such variance with National Statistics status publications from Edinburgh.

Had this data gone to the EU, then flawed data from the UK Government would have been compiled that was damaging to Scotland.

The timing in referendum year might give rise to suspicions the experimental data would end up with Eurostat and then be quoted back to us by Unionists as ‘proof’ that the Scottish Government’s figures on economic performance were wrong. Nothing quite beats the patriot fervour of some of our Unionist friends.

Surely not. Could a unit inside ONS Newport, responsible to government at Westminster really be so devious? And just to be even handed – could it have been a SG mole slipped in to damage the reputation of ONS?

Perhaps it was just a gaffe!

I contacted Trevor Fenton at the ONS and after a bit of a wait he responded.  He confirmed that the ONS had not provided the flawed data to the Eurostat and that data sent was from their long standing data gathering method.

In his response Trevor wrote:

“We continue to send current price regional GVA estimates using the income approach (our long established National Statistics measure) to Eurostat, and these are the statistics used to inform EU decisions on, for instance, Structural Funds allocation.

“Our aim is to work with users (including the EU) to understand their needs and resolve the issues that have been identified with the experimental statistics methodology. We plan to publish an article explaining the issues in January 2014, and seek views on the best way forward. Depending on the outcome of this exercise, we may publish revised estimates of real GVA earlier than December 2014. We are conscious of the need for any confusion to be cleared up as early as possible to minimise the risk of misunderstanding during the period leading up to the Scottish Referendum in September.”

So, by dint of good fortune data that suggested Scotland’s economic performance from 1998 was half of what it really was had not been sent to the EU.  A sharp eyed journalist at the Financial Times had uncovered a story of blundering that might have had huge implications for the independence referendum.

Before leaving this story it is worth a quick look at the last Eurostat regional analysis.  Although London heads the list for GDP per capita, that is because of the wealth of Inner London.  Comparing Outer London to Scotland’s four NUTS2 areas makes for interesting reading.

Inner London heads the list for output per capita of all the UK 37 sub regions in NUTS2 as it does on the EU wide comparison.  In second place is NE Scotland, Eastern Scotland, comes in at 9 and South Western Scotland at 14 pips Outer London at 15th place.

So two of Scotland’s regions are in the top quartile and one is in the second quartile.  Only the Highlands and Islands is in the last quartile at 30 ahead of Shropshire and Staffordshire and just behind South Yorkshire.

Of the 12 regions/nations of the UK, Scotland has the highest GDP per capita after London and the South East of England

Given that Scotland’s growth rate has now overtaken the UK’s, which it has historically lagged behind, we can look forward to better things if we have full control over our economy.  That would enable an Independent Scotland to address the less well performing parts of our NUTS2 areas.

[Russell Bruce and Newsnet Scotland wish to acknowledge the work of Chris Giles and the Financial Times in bringing this story into the light of day.  It has not been followed up by any of the main newspapers or broadcast media in Scotland.   Had the flawed data made it to the EU and then been published, what odds it would have been headlined by these same newspapers and broadcasters?]