Is the Office of National Statistics Efficient in Performing Its Duties?
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The Uncertain State of Labour Market Data: A Closer Look at the Office for National Statistics
The Office for National Statistics (ONS) is the UK government's data authority, responsible for "collecting, analyzing, and disseminating statistics about the UK's economy, society, and population" primarily for government and policy purposes. Originally part of the government, the ONS became a non-ministerial department reporting directly to parliament in 2008.
But the trust in some of its statistics is waning. In a speech at Mansion House in November, the Bank of England’s governor, Andrew Bailey, highlighted that unreliable labour market statistics have become a "substantial problem" for the central bank, influencing policy decision-making. Specifically, the Bank's chief economist, Huw Pill, suspects that ONS figures may underestimate employment growth and overstate the rates of labour-force inactivity. Additionally, concerns over the reliability of ONS data have been raised by the Office for Budget Responsibility, parliament's Treasury Select Committee, and several think tanks.
The Issue at Hand: Plummeting Response Rates for the Labour Force Survey (LFS)
A significant part of this predicament revolves around dwindling response rates for the LFS. Initially sent as a letter to households followed by phone or in-person interviews, a ten-year-old response rate of about 50% has plummeted, particularly following the pandemic. Currently, the response rate stands at a mere 17.3% in 2023, with projections for even lower figures in the previous year. The ONS's chief, Ian Diamond, attributes this shift to a growing public reticence, citing reasons like caution surrounding the sharing of personal information, decreasing trust in government, reluctance to have interviewers in homes, and increased challenges accessing secured properties.
The Fallout: A Questionable Picture of Employment and Economic Activity
The downsized sample size suggests less reliable data, potentially leading to the LFS recording individuals who are at home and overestimating overall economic inactivity. The Resolution think tank estimates that as many as 930,000 workers may have been "lost" due to the LFS's inaccuracies. To boot, the ONS has lowered the status of its employment data from "national statistic" to "experimental," making policymakers' decisions based on shaky numbers and paints a shaky picture of employment trends post-pandemic in the UK.
Improvements on the Horizon?
The ONS is working on an "online-first" version of the survey to boost participation by streamlining questions and making it less demanding for participants. Kids, you can think of it like transforming a 16-page booklet into a one-page pamphlet! The system is currently being tested with introduction letters containing a QR code that can be scanned using mobile phones. However, the ONS admits that this new version may not be ready for rollout until 2027, leaving government officials unimpressed.
Other Controversies Surrounding the Office for National Statistics: Are Net Inward Migration and Housing Data Accurate?
There are indeed other troubles Plaguing the ONS. When it comes to net inward migration, the ONS has been criticized for underestimating the numbers. In 2023 and 2022, respective figures were revised from 740,000 to 906,000 and from 606,000 to 872,000 - levels akin to adding another Oxford or Stoke. Additionally, Neal Hudson of the Financial Times notes that the ONS's housing data is "not fit for purpose." Relying too heavily on incomplete building-control data from a single source, the National House Building Council, the ONS undercounts the true number of new dwellings.
Nevertheless, the ONS’s figures on production, trade, and GDP are generally considered reliable, according to Andrew Sentance on CapX. Even so, the Living Costs and Food Survey, an essential factor in assembling GDP figures, shares the LFS’s low response rate and is increasingly prone to subsequent revisions.
What Can Be Done?
While the ONS is typically a trusted and accurate data source, some have criticized its slow response to adapting its techniques for data collection and analysis. Solutions must be put into action quickly to address these concerns. The ONS’s regulator, the Statistics Authority, should demand an action plan outlining how the agency plans to be more proactive and responsive to stakeholders' needs. Failing that, the Treasury should intervene and oversee improvements, as suggested by Meg Hillier, chair of the Treasury Select Committee. Furthermore, the state needs to become more assertive in compelling participation in nationally significant data collection efforts in various sectors, including the economy, health, and justice system, a perspective shared by experts at The Economist.
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- The Bank of England's governor, Andrew Bailey, expressed concerns about the unreliable labor market statistics from the Office for National Statistics (ONS), stating that these could significantly impact policy-and-legislation decisions, particularly in the politics domain, as they might underestimate employment growth and overstate labor-force inactivity.
- Amidst criticisms of inaccuracies in various data, such as net inward migration and housing data, the general-news landscape is abuzz with discussions about the need for the Office for National Statistics to demonstrate greater flexibility and speed in adapting its data collection and analysis methods, a call supported by experts in the economy, health, and justice system.
