02 March 2007
The government has shelved controversial plans to produce estimates of public sector productivity as part of an overhaul of national accounting, Public Finance has learnt.
Officials at the Office for National Statistics this week confirmed that work on productivity estimates for education, NHS trusts, general practitioners and adult social services have been delayed until a more comprehensive and accurate system of National Accounts is introduced in 2008.
'Some of the indicators for improved public sector outputs have been put on hold, including education, adult social services and GPs,' an ONS spokesman told PF. Many of these changes were due by 2007. Other delayed public sector changes include proposed reclassifications of NHS trusts, the BBC licence fee and the Channel Tunnel rail link operator.
While the changes outlined by the ONS on February 23 are overdue – national accountants first consulted on some of them a decade ago – the move will buy the government much-needed time before publishing its problematic public sector estimates.
Ministers have long been fearful that new measurements of education and NHS productivity, if they expose only minor improvements, would lead to Opposition claims that record investment under Labour has not improved services sufficiently.
In 2004, John Reid, then health secretary, described NHS national statistics as 'absurd' after ONS measurements indicated that productivity had fallen. Subsequent ONS changes led to counter-claims by Opposition parties that the government had 'politicised' national accounting.
The introduction in 2008 of a more comprehensive Blue Book, which contains the ONS's accounting rules and methodology, could also serve the government well for other reasons: experts estimate that revisions to the current system could boost UK gross domestic product by up to 4%, or £60bn annually.
Higher UK GDP could provide the government with an additional 'buffer zone' under the Treasury's self-imposed fiscal rules: national debt, expressed as a percentage of GDP, is more likely to stay below the government's 40% target.
The biggest productivity boost, almost 2% of GDP, would be provided by the delayed introduction of the Financial Intermediary Services Indirectly Measured (Fisim), which will provide more accurate measurements of the UK's strong banking sector.
The ONS accepted that the delays would also 'create some temporary additional uncertainty about the path of the economy' before 2008 – possibly skewing Chancellor Gordon Brown's Budget forecasts.
Although the changes leave the ONS and government open to further accusations of politicisation, they are necessary to prevent wide variations in the figures over the next few years, Martin Weale, director of the National Institute for Economic and Social Research, told PF.
'Delaying the public sector [productivity] figures is a good idea because the government has only recently established a consensus on the methodology. It will also help to avoid regular changes to the Blue Book, which are disruptive and confusing.'
PFmar2007
