ONS urged to improve measurement of the economy in Bean review

11 Mar 16

The economy could be larger than official statistics show as measurements fail to effectively capture new forms of activity in the digital economy, according to a government-commissioned review by Sir Charlie Bean.

Bean, a professor of economics at the London School of Economics, said that the economy could be growing at a rate between one-third to two-thirds of a percentage point faster than is currently recorded, which would add a “potentially significant” amount to gross domestic product.

His report argues that fast technological advancements in recent years had changed the way business such as Amazon or Skype operate and given rise to new ways of exchanging and providing services, for example booking accommodation through Airbnb.

The fact that many businesses now operate across borders and depend on intangible assets has also muddied the waters, the former deputy governor of the Bank of England noted, causing further difficulty in measuring this economic activity.

As well as growth, this has implications for other figures such as inflation, which may currently be overestimated as measurements fail to fully pick up the effect of services like Airbnb.

Bean was commissioned by chancellor George Osborne and Cabinet Office minister Matthew Hancock to carry out an independent review into the UK’s economic statistics in the 2015 Summer Budget.

He has now set out a number of recommendations for the UK Statistics Authority, responsible for official statistics.

To work towards better capturing these new features of the economy, Bean recommended that the Office for National Statistics, an arm of the UKSA responsible for the UK’s main economic statistics, should set up a research centre to work with stakeholders like academics and businesses to find ways to fill the gaps in its measurement.

The report also recommends ONS set up a data science hub that make better use of new techniques and analysis to improve its capabilities in using big data.

Bean added that there needs to be a “culture change” within the ONS, which has become “overwhelmingly focused on churning the handle” and just getting statistics out, rather than evaluating how relevant and accurate they are.

He argued that instead the ONS needs to be more agile, curious and self-critical in order to deliver the “statistics we need for the future”. It must also place user needs at the heart of everything it does, he added.

Following concerns that many economic statistics are deficient, the report also identified a need to shake up the governance of the ONS to enable greater scrutiny of its statistics.

It is currently overseen by the UKSA, but the review concluded the UKSA was not adequately fulfilling its regulatory function.

Bean’s report recommends the establishment of a new Independent Evaluation and Regulation Office within the UKSA to monitor both the quality of statistics and ONS performance.

Building on findings of his interim review, released last year, Bean reiterated that the ONS needs to make better use of the existing hoard of administrative data that the public sector collects in the course of its day-to-day business. Data from the private sector could also be leveraged.

This would require changes to the associated legal frameworks, which currently prohibit ONS access to such data, but the review said it has the potential to greatly improve economic statistics.

Bean added it would also reduce the burden on households and businesses, which are currently the main source of ONS data through regular surveys.

“We need to take economic statistics back to the future or risk missing out an important part of the modern economy from official figures.

“If all were implemented, my recommendations could ensure that the ONS becomes world class again and one of the leaders in national statistics across the world.”

Hancock welcomed the review, which he called an "authoritative, considered and high quality analysis" and "substantial contribution to the global debate on this issue". 

He said the government shares the ambition for UK national statistics to rise to the challenge of an increasingly technological economy, and that the government will respond to the report's recommendations shortly.