UK Statistics Authority response to the Lords Economic Affairs Committee report on their use of RPI inquiry

Dear Lord Forsyth,

Following the Committee’s recent report on Measuring Inflation, I write with the UK Statistics Authority’s response to your recommendations.

As your report made clear, the question faced by the Authority in 2012 was whether to make substantive changes to the construction of the Retail Prices Index (RPI). The decision made by the then National Statistician, one widely supported in the consultation at the time, was to leave the RPI unchanged. This decision gave rise in turn to the conclusion that the RPI should be treated as a legacy measure, with no future substantive changes to its construction and methods. That position was endorsed by an independent review of consumer prices led by Paul Johnson, which reported in 2015. In the period since, the Office for National Statistics (ONS) has developed alternative measures of inflation, and the Authority has urged users to move away from the RPI.

Nonetheless, the RPI continues in widespread use. This – along with new advice from ONS on the flaws of the RPI, new advice from the National Statistician’s Advisory Panels, and the urgings of your Committee – convinced the Board that further action was necessary. The then National Statistician put options for the future of the RPI to the UK Statistics Authority’s Board on 26 February 2019.

After receiving this advice, Sir David Norgrove, Chair of the UK Statistics Authority, wrote on behalf of the Board to the previous Chancellor of the Exchequer on 4 March 2019 with the following recommendations:

  • that the publication of the RPI be stopped at a point in future; and
  • in the interim, the shortcomings of the RPI should be addressed by bringing the methods of the CPIH into it.

Today the Chancellor has announced his intention to consult on whether to bring the methods in CPIH into RPI between 2025 and 2030, effectively aligning the measures.

The proposals made by the Authority address many of the recommendations made by the Committee in its report. More detailed responses to the other recommendations are set out in the attached Annex.
Yours sincerely,

Sir David Norgrove

Related Links:

ONS oral evidence – (2018)

UKSA oral evidence – (2018)

UKSA follow up written evidence – (2018)

 

Annex: Detailed Response to Specific Recommendations

  1. We heard evidence that the Carli formula, as used in the RPI, produces an upward bias. But expert opinion on the shortcomings of the RPI differs. (Paragraph 99)
  2. There is however broad agreement that the widening of the range of clothing for which prices were collected has produced price data which, when combined with the Carli formula, have led to a substantial increase in the annual rate of growth of RPI. (Paragraph 100)
  3. We are not in a position to reach a conclusion on the question of whether the Carli formula is problematic in areas other than clothing. Given the properties of the Carli formula that may lead to upward bias have long been evident, yet expert opinion still differs, it may be a perpetual debate. (Paragraph 101)

The Authority agrees that there is never likely to be unanimity on the issue of the elementary indices (e.g. Carli, Jevons or Dutot) used in inflation measurement. There is no single universally agreed set of criteria against which to judge them and there are specific examples where each index can be shown to produce either plausible or implausible results. A judgement therefore needs to be taken in the round.

Our view is that the Carli is not generally a good index. A thorough exploration of the issues related to the Carli index was set out in both Chapter 10 of the independent review of consumer prices by Paul Johnson and the 2012 review of UK consumer price statistics conducted by Erwin Diewert, a leading authority on index numbers.

This view is supported by international practice and the National Statistician’s Technical Advisory Panel for Consumer Prices. Many technical manuals and academic papers also highlight the undesirable properties of the Carli index. Regulations on the production of the Harmonised Index of Consumer Prices go further and state that the Carli should not be used unless it can be demonstrated to behave in a similar way to the Jevons or Dutot.

We agree that the interaction between the Carli index and the collection of clothing prices created an increase in the rate of RPI inflation in 2010. It was this event that led ONS and the Authority to put in place a programme of work that led to the 2012 consultation on the future of RPI.

4. Given its widespread use, it is surprising that the UK Statistics Authority is treating RPI as a ‘legacy measure’. The programme of periodic methodological improvements should be resumed. (Paragraph 116)

5. We are unconvinced by the National Statistician’s suggestion that in publishing statistics that serve the public good, the interests of those who may be affected negatively by any change should be taken into account. It is not clear from section 7 of the Statistics and Registration Service Act 2007 that this is a relevant consideration for the statistical authorities to be taking into account when they are producing and publishing statistics. (Paragraph 117)

6. What is clear from section 7 is that the UK Statistics Authority has to promote and safeguard the quality of official statistics, which includes their impartiality, accuracy and relevance, and coherence with other statistics. In publishing an index which it admits is flawed but refuses to fix, the Authority could be accused of failing in its statutory duties. (Paragraph 118)

7. We believe section 7 requires the Authority to attempt to fix the issue with clothing prices. Section 21 may require the Authority to consult the Bank of England over the change and obtain the consent of the Chancellor of the Exchequer, however this provision cannot be cited as a reason for not requesting the change in the first place. (Paragraph 119)

8. If the Authority requests the change, the Chancellor of the Exchequer should consent to it. It is untenable for an official statistic, that is used widely, to continue to be published with flaws that are admitted openly. (Paragraph 120) 

The announcements by the UK Statistics Authority and HM Treasury on 4 September deal with this substantive issue raised in these recommendations, and are summarised in the covering letter to this response.

9. While we accept the arguments that consumer price indices have different purposes, we do not believe this warrants the production of multiple indices for government use. Two different measures of inflation allow a government to engage in ‘inflation shopping’. (Paragraph 134)

10. The Government should address the imbalance in its use of consumer price indices. It risks undermining public confidence in economic statistics. It is encouraging to see that the present Government is taking some steps to address the imbalance, for example with the change to uprating business rates by CPI and recent discussions around rail fares. (Paragraph 135)

11. In future there should be one measure of general inflation that is used by the Government for all purposes. This would be simpler and easier for the public to understand. But the UK Statistics Authority should also continue to develop the Household Cost Indices, discussed below. (Paragraph 136)

We welcome the Committee’s recommendation that the Household Cost Indices should continue to be developed. On 28 June 2019, the National Statistician outlined the next steps in the development of these Indices.

12. We disagree with the UK Statistics Authority that RPI does not have the potential to become a good measure of inflation. With the improvements to RPI that we set out in the previous chapter, and a better method of capturing owner-occupier housing costs as discussed below, we believe RPI would be a viable candidate for the single general measure of inflation. (Paragraph 139)

13. We are not convinced by the use of rental equivalence in CPIH to impute owneroccupier housing costs. The UK Statistics Authority, together with its stakeholder and technical advisory panels and a consultation of a wide range of interested parties, should agree on the best method for capturing owner-occupier housing costs in a consumer price index. (Paragraph 153)

14. Once a method of capturing owner-occupier housing costs has been agreed, the UK Statistics Authority, after consulting the stakeholder and technical panels, should decide which index to recommend as the Government’s single general measure of inflation. The Government should have adopted the preferred candidate as its single general measure of inflation within five years. (Paragraph 154)

Owner occupiers’ housing (OOH) costs are one of the most challenging aspects of inflation to measure. There is also no single approach that will be correct in all circumstances, as the choice will depend on the purpose of the index and also practical issues around data availability. In light of this, ONS has spent the last 10 years developing and consulting on its approaches to owner occupiers’ housing costs.

The development of an OOH measure for CPI was first considered in 2009 by the Consumer Prices Advisory Committee (CPAC). The committee then spent the next three years investigating different approaches to measuring OOH costs. In September 2010 it narrowed down the options to two – net acquisitions and rental equivalence – which it evaluated in detail against the five dimensions of statistical quality defined by the European Statistical System. The Committee finally agreed on rental equivalence in April 2012, giving consideration to both conceptual appropriateness and how well the index could be calculated in practice.

A first consultation was launched in the summer of 2012, in which users were asked about rental equivalence. The responses were fairly evenly split between support for rental equivalence, net acquisitions and neither approach. The National Statistician chose rental equivalence reflecting the quality of the underlying data available and whether asset prices were appropriately treated. The process is described in more detail in Appendix A of the CPIH Compendium.

Paul Johnson’s review of consumer prices was published in January 2015. This looked again at CPAC’s recommendation to use the rental equivalence method. It concluded the underlying assumptions are reasonable in a UK context and that the measure is based on a large, detailed source of underlying data. Therefore, the Review recommended that ONS should continue to use the rental equivalence measure.

A further consultation was conducted on the findings of the Johnson Review. Responses to the review on CPIH and OOH were again mixed, highlighting that users are unlikely to come to an agreement on the most appropriate choice for measuring OOH costs.

The Office for Statistics Regulation’s 2016 re-assessment of CPIH as a National Statistic noted that ‘there is some disagreement among users about the concepts and methods…’ Work to address these recommendations resulted in a wide ranging process of user engagement on CPIH, and the publication of numerous supporting materials such as the CPIH Compendium, which articulates the rationale for ONS’s choice of rental equivalence alongside the pros and cons of each approach, an ongoing published comparison of alternative OOH measures, and documentation on the various users and uses of our consumer price inflation statistics.

ONS have also looked at international practice where they found widespread use of the rental equivalence measure. The approach taken by different countries is summarised in the CPIH Compendium. Of the 40 countries considered, the most common approach is rental equivalence (12 countries) if discounting those that exclude OOH altogether (15 countries). It is also worth noting that the method requires a reasonably large rental market to work, and so many countries may be constrained in their choice by the availability of data. The countries that use rental equivalence include the United States, Germany, Norway and the Netherlands.

In light of the 10 years of development and consultation, ONS are not minded to undertake any further engagement with users and experts specifically on rental equivalence and owner-occupier housing costs. There is never likely to be agreement on a single approach. ONS views rental equivalence as the correct approach conceptually for an economic measure of inflation, and one where sufficient data is available to make it practical. Of course, they remain committed to ongoing monitoring and development of the CPIH and the Household Cost Indices.

15.Our recommendations will not however solve the issue of index or inflation shopping immediately. The Government will need to take action in the interim to address this. (Paragraph 155)

16.While the single general measure is being determined, the Government should switch to CPI for uprating purposes in all areas where it is not bound by contract to use RPI (except for the interest rate on student loans which, as we recommended in our Treating Students Fairly report, should be set at the ten year gilt rate thus reflecting the Government’s cost of borrowing). (Paragraph 156)

17.The Government should begin to issue CPI-linked gilts and stop issuing RPI-linked gilts. We heard evidence to suggest there was sufficient demand to make a viable market. (Paragraph 170)

18.Once the long-term single official measure of inflation has been agreed, gilts should begin to be issued that are linked to that index. The prospectuses for new issuances of index-linked gilts should be clear that the inflation index will change to the Government’s single general measure of inflation once it has been agreed. (Paragraph 171)

Recommendations (15) to (18) are primarily directed at HM Government and the Authority has nothing to say on those issues. We continue to urge the Government to cease to use the RPI for its own purposes where practical.

19. Once the single general measure of inflation has been introduced, the UK Statistics Authority and the Government should decide whether RPI should continue to be published in its existing form for the purposes of existing RPI-linked contracts, or whether a programme of adjustments should be made to the RPI so that it converges on the single general measure. (Paragraph 194)

20. To avoid disruption, we envisage any programme of convergence would take place gradually, over a sufficiently long time, and that the plan for that should be published at the outset. (Paragraph 195)

21. We note that the consent of the Chancellor of the Exchequer to changes to RPI that cause material detriment to index-linked gilts holders is no longer required after the last issuance to which that clause relates to expires in 2030. (Paragraph 196)

We strongly agree that any changes to the RPI or stopping the publication of RPI needs to be carefully planned. The Authority and ONS have been discussing the mechanics of any changes with the Government in the run up to the 4 September announcement.

Office for National Statistics response to the Lords Economic Affairs Committee’s report on economics of higher, further and technical education

Dear Lord Forsyth,

Further to the National Statistician’s comments to the Committee on 17 July, I am writing to offer the Office for National Statistics (ONS) response to the Economic Affairs Committee report on Treating Students Fairly: The Economics of Post-School Education.

The Committee made one recommendation relating to ONS:

“Most student loans will not be repaid in full: some will be paid in full, some not at all, and a lot only partially repaid. The expected write-offs should be shown in the deficit when the loan is issued. The true cost of funding higher education would then be immediately apparent. This would allow for a better discussion as to where funding in the higher education system should be allocated. (Paragraph 42 and 388)”

In our written evidence, submitted to the Committee January 2018, we explained how student loans are currently treated in the National Accounts and public finance statistics, specifically that student loans are treated as any other loan following the approach mandated in the European System of Accounts and the United Nations System of National Accounts.

However, as you mention in your report, there are certain features of UK student loans that appear to distinguish them from other loans. They have a high level of contingency, both as they are based on a student’s subsequent income and as there are a number of scenarios under which the loans, or the portion of the loans not yet repaid, will be written off.

Reflecting further on the contingent nature of student loans and the issues raised by the Committee, we recognise that there is a need to establish whether student loans should be treated within national accounts as loan assets for government, or whether they should in part, or in total, be viewed as contingent assets.

In April we announced that we had begun a review into how best to record student loans within national accounts and the public sector finances. This is not an easy issue to tackle and one which has implications wider than the UK given the use of income contingent loans in other countries. We have therefore been discussing with international agencies and other countries the relevant issues and examples with a view to identifying the appropriate statistical treatment, and from there to develop relevant guidance.

On 17 July we published information on the main accounting options we have been considering as part of the student loan review, along with the pros and cons and implications for each option. There is still work to do on evaluating the different options but we are continuing to engage with our international partners and are hopeful that we will reach internationally an agreed treatment by the end of the year. It is important to note, however, that implementation within the fiscal statistics and national accounts is likely to take longer given the complex nature of many of the options under consideration. I hope the Committee will welcome this work.

Yours sincerely,

Jonathan Athow Deputy National Statistician and Director General, Economic Statistics Office for National Statistics

Related links:

ONS written evidence (2018)

Office for National Statistics oral evidence to the Lords Economic Affairs Committee’s inquiry on the use of RPI

On 17 July 2018, John Pullinger CB, UK National Statistician, Head of the Government Statistical Service and Chief Executive of the UK Statistics Authority, gave evidence to the Economic Affairs Committee’s inquiry on the use of RPI.

A transcript of which has been published on the UK Parliament’s website.

Related Links:

UKSA oral evidence – (2018)

UKSA follow up written evidence – (2018)

UKSA response to report (2019)

 

UK Statistics Authority follow-up written evidence to the Lords Economic Affairs Committee’s inquiry on the use of RPI

Dear Lord Forsyth,

I am writing with additional information the Committee requested when we gave evidence on 12 June. These are attached at Annex A.

I would also like to take this opportunity to reaffirm the position of the UK Statistics Authority that the Retail Prices Index (RPI) is not a good measure of inflation, does not have the potential to become one, and we strongly discourage its use. Its continued publication is a result of the legislation and the way it is built into a range of contracts.

We continue to encourage users to move away from the RPI to better measures, while recognising that there is never likely to be a single measure of inflation that captures all individual experiences of price changes or meets all user needs. The Consumer Price Index including owner-occupiers’ housing costs (CPIH) and the Consumer Price Index (CPI) are both National Statistics, and the Office for National Statistics (ONS) are developing new Household Cost Indices with a particular focus on the experience of different household types. They have set out for users the different characteristics of these different families of indices.

We welcome the statement by the Chancellor on 25 April that the direction of travel is away from the RPI to the CPIH. The Governor of the Bank of England has also made the case against the use of RPI.

We have seen the use of RPI decline over time. Nonetheless, like the Committee we see continuing uses of the RPI that are difficult to justify. I have for example said publicly that I am concerned by its use for student loans and rail fares.

As we discussed, the issues around the use of RPI are complex, often reflecting decisions and contracts made many years ago. Changes will need to be carefully planned and coordinated. The UK Statistics Authority and ONS look forward to playing their parts in making the changes that are needed.

Yours sincerely

Sir David Norgrove

Related Links:

ONS oral evidence – (2018)

UKSA oral evidence – (2018)

UKSA response to report (2019)

Office for National Statistics response to the Lords Economic Affairs Committee’s report on the economics of higher, further and technical education

Dear Lord Forsyth,

I am writing in response to your call for evidence for the economics of higher, future and technical education inquiry.

In particular, we understand your Committee are interested in how student loan transactions impact fiscal aggregates, such as Public Sector Net Borrowing (PSNB) and Public Sector Net Debt (PSND). In addition, information on how the impacts on fiscal aggregates are decided and whether there is any scope for government to change the fiscal treatment of student loans.

We are providing this information to assist your inquiry and would be very happy to provide further clarification and advice on any points of interest to yourself and the Committee, as required.
Yours sincerely,

Jonathan Athow

Related links:

ONS response to report (2018)

How are student loans recorded in the public sector finances?

Different student loan transactions will impact the fiscal aggregates differently. The below table summarises the impact of a variety of different transactions.

Table 1: Effect on key fiscal aggregates of student loan transactions

TransactionPublic Sector Net Borrowing (PSNB) ‘the deficit’Public Sector Net Debt (PSND)Public Sector Net Cash Requirement (PSNCR)
Issuing of student loan to individualNo effectIncreases by value of portion of loan issued directly to individual1Increases by value of portion of loan issued directly to individual1
Tuition fee is passed to universityNo effectIncreases by value of portion of loan issued directly to individual1Increases by value of tuition fee passed directly to university1
Interest is accrued on student loanDecreases as interest accruesNo effectNo effect
Student makes repayment of student loan interestNo effectDecreases as repayment madeDecreases as repayment made
Student makes repayment of student loan capitalNo effectDecreases as repayment madeDecreases as repayment made
Government impairs a student loan in Department for Education Accounts, as a result of assessment of likelihood to payNo effectNo effectNo effect
Student loan interest is written off by Government after 25 / 30 yearsIncreases by value of write offNo effectNo effect
Student loan capital is written off by Government after 25 / 30 yearsIncreases by value of write offNo effectNo effect
Student loan capital is sold off below face value prior to being written offNo effectDecreases by value of cash received from saleDecreases by value of cash received from sale
Student loan accrued interest is sold off below face value prior to being written offNo effectDecreases by value of cash received from saleDecreases by value of cash received from sale
Student loan capital is revalued below face value prior to sale, and then sold offIf written off prior to sale then increases by value of write off, otherwise no effectDecreases by value of cash received from saleDecreases by value of cash received from sale
Student loan interest is revalued below face value prior to sale, and then sold offIf written off prior to sale then increases by value of write off, otherwise no effectDecreases by value of cash received from saleDecreases by value of cash received from sale
Accrued interest not yet received when loans are sold off or written offWhen sold off no effect , When written off increases by value of write off, In both cases (sold off or written off) there will be no future PSNB benefit from further accrual of interest on the loans sold/written offNo effectNo effect

1 We have partitioned the loan into the part paid directly to the individual and the part paid directly to the university.

The public sector finances, and the key fiscal aggregates they contain, are based on the principles and building blocks of the National Accounts, which is an international statistical framework published by the United Nations. The National Accounts are a single coherent and exhaustive description of economic activity in the UK and the public sector fiscal aggregates are based on National Accounts principles and definitions. One implication of this is that transactions should impact creditors and debtors in a consistent and symmetric manner. It is for this reason that National Accounts records loans at their nominal value (i.e. initial amount of loan, plus interest accrued, less repayments).

To put this in the context of student loans, an individual in receipt of a student loan is liable for repayment of that loan capital, and the accrued interest on the loan, up until that loan is written off or cancelled (either for death, disability or reaching cancellation threshold). Government impairment of student loan assets and sale of those loans below the nominal value has no impact on the student liability and so is not recognised within the government accounts, as compiled under National Accounts. It is for this reason that student loan write-offs impact the fiscal aggregates differently to student loan impairments or sales.

Who decides on how to record student loans in the public sector finances?

UK fiscal policy is set by HM Treasury and since 1998 Treasury have based its fiscal framework on National Accounts principles. This means that the key fiscal measures of PSNB and PSND are based on the concepts of National Accounts.

However, it is the responsibility of ONS to compile PSNB and PSND ensuring that the underlying economic reality of transactions and financial instruments is followed when deciding whether or not a particular transaction should impact PSNB or an instrument be included in PSND. ONS reaches these decisions in compliance with the international (UN) statistical guidance for National Accounts.

In the case of student loans, ONS has concluded that these should be classified as “loans” in National Accounts. This means that only accrued interest and write-offs impact PSNB whilst PSND impacts reflect the cash flows on issuance and on receipt of interest and capital repayments.

The recording of student loans as loans in National Accounts, and so the fiscal aggregates, is based on the fact that they have the following features:

  • are bilateral agreements agreed between the lender (government) and borrower (student)
  • are taken out on the initiative of the borrower
  • are interest bearing
  • are not compulsory requirements for all higher education students
  • are an unconditional debt to the borrower that has to be repaid (subject to meeting certain conditions).

Could student loans be recorded differently in the public sector finances?

In the opinion of ONS, student loans meet the definition of loans in the National Accounts and it follows from this that they impact the key fiscal aggregates in the ways set out in Table 1.

Student loan repayments have been dubbed by some a “graduate tax”, however they do not meet the definition of a tax in National Accounts as they are not compulsory, unrequited payments but are payments linked directly to funds extended by the government. Similarly, student loan payments by government are not subsidies in National Accounts as they are not unrequited payments.

It might be conceivable to consider student loans as a series of transfers out of government, at the point of loan issuance, and into government when interest and capital repayments are made. Such a recording would mean that all cash paid at issuance would be recorded as government spending and all cash received in repayments as revenue, with both spending and revenue impacting PSNB.

There are no doubt other creative ways, to that described in the above paragraph, by which student loans could be recorded. However, it should be reiterated that ONS is firmly of the view that the economic nature of student loans closely matches the definition of a loan in National Accounts and should be recorded as such in both the National Accounts and the UK fiscal aggregates.

As noted by the Office for Budget Responsibility (OBR) in its Fiscal Risks Report, it is the case that the recording of student loans in the National Accounts means that PSNB is reduced by accrued interest that may never be paid. However, “eventually this over-recording will be resolved by writing off any outstanding portion of the loan. But this may not be until years later”.

Office for National Statistics, January 2018

Office for National Statistics written evidence to the Lords Citizenship and Civic Engagement Committee’s inquiry of the same name

Dear Lord Hodgson,

I write in response to the Committee on Citizenship and Civic Engagement’s call for evidence.

The Office for National Statistics (ONS) is the UK’s National Statistical Institute, and largest producer of official statistics. We aim to provide a firm evidence base for sound decisions, and develop the role of official statistics in democratic debate.

The Committee’s call for evidence posed twelve wide-ranging questions on citizenship and civic engagement in the United Kingdom.

The attached note sets out what official statistics are available to decision-makers, to help them address the questions posed by the Committee. Specifically, the note explores:

  • what official data can tell us about the citizenship of the UK’s resident population; both across time, and across the countries and regions of the UK.
  • what we know about social capital in the UK. These measures, first published in 2015, include information on civic engagement, as well as personal relationships, social support networks, and trust.
  • trends in the value and division of unpaid volunteering; and
  • changes in electoral registration and participation.

While we have focused our note on those issues we understand the Committee to be particularly interested in, we have also have also listed a wider range of data sources which may be of assistance to members. Statisticians would of course be happy to provide further analysis, to assist the Committee in its inquiry.

Yours sincerely,

Iain Bell Deputy National Statistician and Director General for Population and Public Policy | Office for National Statistics

 

Citizenship and Civic Engagement

1. Executive Summary

The Office for National Statistics (ONS) is the UK’s National Statistical Institute, and largest producer of official statistics. We aim to provide a firm evidence base to inform decision-making and support democratic debate.

The Office for National Statistics, in partnership with statisticians across the government statistical service, publish a wide range of data on citizenship and civic engagement. Reflecting the Committee’s call for evidence, this note summarises:

  • what official data can tell us about the citizenship of the UK’s resident population; both across time, and across the countries and regions of the UK.
  • what we know about social capital in the UK. These measures, first published in 2015, include information on civic engagement, as well as personal relationships, social support networks, and trust.
  • trends in the value and division of unpaid volunteering; and
  • changes in the electoral registration and participation.

While we have focused our note on those issues we understand the Committee to be particularly interested in, we have also have also listed a wider range of data sources which may be of assistance to members, on national well-being and language proficiency.

2. Citizenship, nationality, and country of birth

This section explores what official statistics are available to policy-makers on the citizenship held by UK residents. It explains that official statistics can provide policy-makers with information on how the makeup of the UK’s resident population has changed over time and by region, by both nationality and country of birth.

This section explains that the composition of the UK’s population has changed over time. It also finds that the citizenship of the UK’s residents varies considerably, between countries and regions. Areas such as London have proportionally high numbers of non-UK nationals and foreign-born resident, whereas the North East have proportionally low numbers in comparison.

What is citizenship? How does it differ from nationality? And how are these concepts recorded in official statistics?

Official data often refer to ‘nationality’, rather than to ‘citizenship.’ By way of example the Annual Population Survey, which underlies the UK’s official population estimates, asks respondents ‘What is your nationality?”.

Generally British citizens, as described in official statistics, include those with UK nationality, usually through a connection with the UK: birth, adoption, descent, registration or naturalisation.

Official statistics also provide a wealth of information about the country of birth of the UK’s resident population, which may be of some assistance to Committee members. It is important to understand that there are differences in the proportion of the UK resident population who report themselves to be non-British nationals, and the proportion of the resident population who are born abroad. This is because:

  1. When people born abroad decide to remain in the UK, the often decide to become British nationals
  2. Some people born abroad have British nationality. For example, this may be the case for people whose parents were in the military services and were based abroad when they were born.
  3. Some people born in the UK to migrant parents take the nationality of their parents.

2.1 The UK’s resident population: the current picture

Drawing from the Annual Population Survey, ONS publishes estimates of the UK’s resident population by country of birth, and nationality.(1)

Latest estimates show that of the UK population, approximately 1 in 7 (or 9.3 million) were born abroad and approximately 1 in 11 (or 6.1 million) held non-British nationality.

In the year ending June 2017, the majority of non-British nationals resident in the UK (60 per cent of the total non-British population) reported that they held an EU nationality.(2) Of the non-British population resident in the UK over this period, Polish, Romanian, Irish, Indian and Italian were the 5 most common nationalities held.

1. The latest estimates, for the period July 2016 to June 2017, were published in November. They are available on the ONS website, here.
2. EU consists of the countries in the EU14 and (from 1 January 2004) the EU8, Malta and Cyprus, and (from 1 January 2007) the EU2, and (from 1 July 2013) Croatia. British nationality is not included in this grouping.

2.2 The UK’s resident population: changes over time

The proportions of British and non-British nationals resident in the UK have changed over time. In 2004, non-British nationals made up 5% of the resident UK population; by 2010 this had increased to 7%. The number of non-British nationals resident in the UK (as a proportion of the total population) continued increasing until 2015 when the proportion of non-British nationals was 9%. It remained at this level in 2016.

The number of EU nationals resident in the UK rose by 1 million between 2012 and 2106 (from 2.6 million to 3.6 million – an increase of 39%), while the number of non-EU (non-British) nationals in the UK remained stable (at 2.4 million at the end of 2016).

From July 2016 to June 2017 there was a statistically significant increase in the non-British national population of the UK, increasing from 5.9 million to 6.1 million. The increase in non-British nationals has been driven by residents holding EU nationality, from 3.4 million to 3.7 million (statistically significant increase).

2.3 The UK by Nationality: geographical differences

Official data show that the proportion of British nationals and non-British nationals resident in the UK varies by region. Table 1, below, sets out the UK’s resident population by nationality and region for July 2016 to June 2017.

 AllBritish Non-British 
Number (000s)Number (000s)Per centNumber (000s)Per cent
United Kingdom64,95258,798916,1339
England54,72649,187905,52110
North East2,6072,50996984
North West7,1206,643934767
Yorkshire & the Humber5,3624,996933647
East Midlands4,6574,266923908
West Midlands5,7345,234914989
East6,0765,534915429
London8,8266,738762,08124
South East8,9158,185927278
South West5,4285,080943456
Wales3,0762,942961334
Scotland5,3044,947933557
Northern Ireland1,8461,722931247

For the year 2016, Wales recorded the lowest proportion of resident non-British nationals, and England the highest. However, the picture varied considerably within England.

In London, 24% of the resident population were non-British nationals, while in North East of England, only 4% of residents were non-British nationals.

3 Social capital and civic engagement

Since 2015, ONS has published estimates of Social Capital; that is, information about the connections between and collective attitudes of people in the UK. We measure social capital because the connections between increasing rates of social capital and positively functioning well-being, economic growth and sustainability are extensively noted.

This chapter explores what measures of social capital tell us about civic engagement; personal relationships; social support networks; and, trust. In doing so, it notes that recent data suggest a largely positive picture of trends in social capital in the long term.

3.1 Civic engagement

Within its annual Social Capital release(4), ONS publishes 8 measures of civic engagement (the most recent data are set out at Table 2, below).

MeasureCoverageSourceLatest YearLatest Data
Percentage who volunteered more than once in the last 12 monthsUKUnderstanding Society: UK Household Longitudinal Study2014 to 201519%
Proportion of people who are members of organisations, whether political, voluntary, professional or recreationalUKUnderstanding Society: UK Household Longitudinal Study2014 to 201553%
Proportion of people who have been involved in at least one social action project in their local area in the previous 12 monthsEnglandCommunity Life Survey, Cabinet Office2015 to 201618%
Proportion of people who definitely agree or tend to agree that they can influence decisions affecting their local areaEnglandCommunity Life Survey, Cabinet Office2015 to 201636%
Voter turnout in UK General ElectionsUKElectoral Commission201566%
Proportion of people who have been involved in at least one political action in the previous 12 monthsUKEurofound, European Quality of Life Survey2011 to 201234%
Proportion of people who are very or quite interested in politicsUKEuropean Social Survey201456%

The proportion of people who participated in unpaid voluntary work has increased between 2010 to 2011 and 2014 to 2015. In 2010 to 2011, 17% of people reported that they had volunteered more than once in the last 12 months. By 2014 to 2015, this figure had risen to 19%.(5)

The percentage of people who took part in a social action(6) between 2014 to 2015 and 2015 to 2016 remained unchanged. Similarly, the percentage of people in the UK who reported membership of organisations whether political, voluntary, professional or recreational also remained unchanged between 2011 to 2012 and 2014 to 2015 (52% and 53% respectively).

While the percentages of people in the UK taking part in social activities showed no overall change over this period, the percentage of people who were engaged with political actions increased from 17% in 2006 to 2007 to 34% in 2011 to 2012.(7)

4 The latest release of Social Capital in the UK was published May 2017 and can be found, here.
5 More information on volunteering is set out at Chapter 4.
6 By ‘social action’ we mean: a community project, event, or activity which local people proactively get together to initiate or support on an unpaid basis. It is distinct from other forms of giving time in that it is driven and led by local people rather than through an existing group (as in formal volunteering) and tends to focus on a community need rather than the needs of an individual (as in informal volunteering). Examples could include organising a street party, preventing the closure of a local post office, helping to run a local playgroup, or improving local road safety’.
7 More information on electoral participation is set out at Chapter 5.

3.2 Personal relationships

The percentage of people saying they feel lonely often or always has not changed significantly between 2014 to 2015 and 2015 to 2016, with the figure staying around 4% on average.

However, the proportion of people meeting socially with friends, relatives or work colleagues at least once a week has decreased from 69% to 61% between 2010 and 2014.

Although the percentage of people meeting socially has dropped, there has been growth in the percentage of people reporting having at least one close friend and this figure improved between 2011 to 2012 and 2014 to 2015, rising from 95% to 97%. This disparity could be due to the rise in the use of the internet for social networking over the past 3 years. In 2016, there were 63% of us who reported using the internet for this purpose in the last 3 months, compared with 53% in 2013.

Research into the relationship between social networking and social capital is still in its early stages but early research suggests that social networking may help bolster social capital in the form of helping people strengthen relationships and aiding integration within communities (Utz and Muscanell, 2015 ). We have therefore interpreted the increase in social networking as an improvement. The proportion of people who regularly stop and talk to their neighbours has also improved over a 3-year period, rising from 66% in 2011 to 2012 to 68% in 2014 to 2015.

3.3 Social support networks

Between 2010 to 2011 and 2013 to 2014, there has been deterioration in the proportion of people saying that they had a spouse, family member or friend to rely on “a lot” in case of a serious problem.

This fell from 86% in 2010 to 2011 to 84% in 2013 to 2014. Furthermore, reciprocal support between parents and their adult children has decreased. The proportion of parents who regularly receive practical or financial help from a child aged 16 or over not living with them decreased from 42% in 2011 to 2012 to 38% in 2013 to 2014. Furthermore, the proportion of parents saying that they were giving help has also decreased between 2011 to 2012 and 2013 to 2014 (63% and 58% respectively). We have considered these measures from the perspective of the receivers of help and as a result assess this as deterioration.

Despite this, the proportion of people who give special help to at least one sick, disabled or elderly person living or not living with them has risen from 19% to 20% between 2013 to 2014 and 2014 to 2015.

3.4 Trust and cooperative norms

To assess generalised trust, the European Social Survey asks, “Generally speaking would you say that most people can be trusted, or that you can’t be too careful in dealing with people?” Respondents are then asked to score their ratings on a scale, from 0 to 10, where 0 means you can’t be too careful and 10 means that most people can be trusted. In 2010, there were 35% of people who rated their general trust as high (7 to 10) and this remained unchanged in 2014.

Another source assessing trust in national government however, over a 3-year period, noted the proportion of people who said they “tend to trust” the national government rose from 24% in the autumn (September to November) of 2013 to 35% in the autumn of 2016.

Further improvements include the proportion of people who agree or strongly agree that they feel they belong to their neighbourhood rose from 63% in 2011 to 2012 to 69% in 2014 to 2015. In addition to this, the proportion of women who felt “fairly” or “very” safe walking alone after dark rose from 57% in 2012 to 2013 to 62% in 2015 to 2016.

4. Volunteering

While ONS’s Social Capital release presents headlines summaries of trends in volunteering, ONS also publishes more detailed analyses of this issue. This chapter summarises these analyses, addressing the allocation of volunteering across households, families and communities. It explains that the proportion of people volunteering over the last 12 months has increased in recent years, while noting that the average time spent volunteering per day has fallen.

4.1 Understanding participation in volunteering activity

In March 2017, ONS published an article on Changes in the value of division of unpaid volunteering the UK: 2000 to 2015.(9) The article, which draws together data from the 2015 Community Life Survey (CLS), the 2001 Home Office Citizenship Survey (CS), and the 2000 and 2015 time use surveys(10), aims to provide decision-makers with improved information about participation in volunteer activity.

9 Changes in the value and division of unpaid volunteering in the UK, published March 2017, can be found here.
10 UK Harmonised European Time Use survey (HETUS)

How does ONS define volunteering?

Volunteering in this publication is defined as voluntary activity in which people volunteer either for an organisation or through an organisation, for free. The kind of activities included range from administrative work on behalf of clubs or teams to coaching, donating blood, or helping out at refuges.

Between 2000 and 2015, the proportion of people whole had volunteered over the last 12 months increased for both men (from 39% to 41%) and women (from 39% to 42%). At the same time, the average time spent volunteering decreased for both men and women.  However, patterns vary across age groups.

In 2015, 51% of those aged 16 to 24 volunteered for an average of 17.0 minutes per day, over the year. This was the highest of all age groups both in terms of participation and average time spent volunteering. Between 2010 and 2015, those in this age group have increased the time they devote to volunteering while those in the next age category up have decreased their volunteering time.

Those aged 16 to 24 saw the highest increase in volunteering participation with a percentage point increase of 11 percentage points between 2000 and 2015. Participation rate changes were then at lower positive growth levels for age groups 25 to 34, 35 to 44 and 45 to 54 (between 0 and 3 percentage points for each group) while those in the 55 to 64 age group saw their rate of participation fall by over 4 percentage points between 2000 and 2015.

It is important to note an increase in volunteering for 16-24 year olds over the past 15 years could be influenced by a number of factors. These include a general increase in numbers going into higher education, changes to school leaving age and a drive from education establishments to increase employability skills, for example an increase of baccalaureate type qualifications which require a certain number of hours volunteer work and initiatives like employability “passports” which require volunteering experience.

4.2 Exploring patterns in volunteering, across different income groups

The data shows that the higher average time volunteering performed by the women volunteer group  was driven by women volunteers from low income households in 2015. In that year, those women volunteers performed the highest average time volunteering per day, at around 19 minutes per day.

Men from both high income and low income households performed lower amounts of volunteering than women, with the average duration of volunteering at around 7 minutes per day for men volunteers in 2015. Comparatively, women from high income households performed less volunteering than women from low income households but still volunteered for an average of 12 minutes per day.

Data suggests that the distribution of volunteering participation rates across age groups similar across income levels.

Regardless of household income, volunteering participation rates for the 25 to 34 age group are among the lowest (32% for low income households and 44% for high income households) while the participation rates of the 16 to 24 year olds were the highest (47% for low income households and 61% participation for high income households in 2015).

From 2012 to 2015, there have been large increases in volunteering for the 16-24 year old age groups from both low and high incomes. Increases have also been seen in all other age groups in the higher income bands, apart from 45-54 and 55-64 year olds. For low income groups, there has been a marked decrease in volunteering for all age groups, apart from the aforementioned 16-24 year olds.

5. The UK’s Electoral Statistics

ONS publishes a range of measures on elections and electoral participation. The following section considers both the number of registered voters in the UK and the most recent voter turnout figures, for the 2015 General Election. It shows both sets of data have increased.

5.1 Registered voters

ONS published its most recent electoral statistics in March 2017. The data within this release capture those people registered to both in parliamentary and local government elections as recorded in electoral registers on 1 December.

In the year to December 2016 the number of people registered to vote in parliamentary and local government elections across the UK increased by around 1 million. In the previous two years the number of people registered to vote had decreased partly as a consequence of the introduction of Individual Electoral Registration (IER). A key driver of the increase in the size of the electorate in the year to December 2016 was public engagement with the EU referendum in June 2016.

Between December 2015 and December 2016 the number of electors increased in England, Wales and Scotland but decreased by 3% in Northern Ireland. This is the opposite of the pattern observed in the 2 years between 2013 and 2015 where the electorate in Northern Ireland increased but decreased across the other 3 countries of the UK.

5.2 Voter Turnout

In addition to its statistics Electoral statistics release, publishes estimates of voter turnout within its Measuring National Well-Being: Life in the UK, April 2017 release.

These data are derived from administrative data from the Electoral Commission and is not estimated. For the 2015 election, this figure was 66%, a small increase compared to the 2010 election where voter turnout was 65%. When broken down by country, as seen in Table 3, Scotland returned the highest voter turnout (71%) in the 2015 election compared to the other constituent countries of the UK, whilst Northern Ireland had the lowest (58%). In the further breakdown by region in the same table, the South West had the highest voter turnout (70%) in contrast to the North East who had the lowest (62%), a difference of 8%.

Regions2015
England66.0
North East61.8
North West64.3
Yorkshire and The Humber63.3
East Midlands66.5
West Midlands64.1
East67.5
London65.4
South East68.6
South West69.5
Wales65.7
Scotland71.0
Northern Ireland58.1

Annex A: Other resources

In addition to the sources set out in this note, Committee members may be interested in the following sources:

Wellbeing:

In November 2010, the Measuring National Well-being programme was established. The aim was to monitor and report “how the UK as a whole is doing” by producing accepted and trusted measures of the well-being of the nation. One question, from the Understanding Society, UK Household Longitudinal Study, asks respondents whether they agree that they “belonged to their neighbourhood”. Respondents are asked to rate their sense of belonging to their neighbourhood from “strongly disagree” to “strongly agree”. Data are available here.

English language proficiency:

Two questions on main language and proficiency in spoken English were included for the first time in the 2011 Census following the content consultation for the England and Wales census form. Using this data, ONS published an article in 2013 looking at Language in England and Wales: 2011 available here.