Treasury Committee

Office for National Statistics correspondence to the Treasury Committee on economic statistics

Dear Dame Meg Hillier,

The previous National Statistician made a commitment to your Committee to provide regularupdates on labour market statistics and other economic statistics as necessary. I am writing in my capacity as Acting National Statistician to continue this commitment and enclose the latest update.

Labour market statistics

On 21 July, the Office for National Statistics (ONS) published an update on labour market transformation progress and plans. Our recently published plans for Economic Statistics and Survey Improvement and Enhancement underline the importance of the Transformed Labour Force Survey (TLFS) for delivering high-quality labour market statistics.

The short Core survey – a streamlined, longitudinal, labour market-focused questionnaire that takes 15 minutes per household to complete on average (compared with an average of around 30 minutes for the longer version of the TLFS) – launched in early July 2025 with a Wave 1 sample size of 90,000 households per quarter across Great Britain.

Combined with the introduction of face-to-face supported completion in October 2025 and data rotation (not re-asking the full questionnaire for each wave) for Waves 2-5 in January 2026, this is expected to reduce respondent burden, improve completion rates and representativeness, and enhance the overall data quality for the headline labour market indicators.

The Core survey is complemented by a cross-sectional “Plus” survey with a separate sample of 90,000 households per quarter. We are collaborating with users to assess how the Plus survey is meeting their needs for additional labour market, and wider household, socioeconomic and local data.

The timing of transition to the TLFS remains an evidence-led decision. We will carry out a readiness assessment in collaboration with our main users in July 2026. We aim to transition our published headline labour market statistics in November 2026, although this may extend into 2027 if our (or users’) assessment of quality requires more data to be collected and assessed.

Therefore, the Labour Force Survey (LFS) remains the lead measure for data on the supply of labour while further development of the TLFS takes place. Following discussion with our main users, we published our LFS quality update alongside our labour market statistics release on 13 May. The interventions made so far to address quality concerns with the LFS – such as reinstating the sample boost, returning to face-to-face interviewing, increasing incentives and the ongoing recruitment of additional interviewers – have now fed through all five waves of the survey and improvements can broadly be seen in response levels and rates, as well as the composition of respondents according to different characteristics. These improvements are important as they increase confidence that the LFS can be fit for purpose until the transition to TLFS takes place.

The TLFS was established as a formal programme in June 2025, having previously been managed as distinct projects within two separate programmes. This change brings together the full end-to-end scope of delivery, with a designated Senior Responsible Owner, clear accountability, governance and measurable objectives. The Programme Board includes external representatives from the devolved governments and HM Treasury.

We continue to engage with external stakeholders for assurance of our approach, including the Stakeholder Advisory Panel on Labour Market Statistics [2], the Labour Market Technical Group and the Household, Socioeconomic and Local Group. The programme remains focused on restoring user confidence in our labour market statistics and in our wider household, socioeconomic and local statistics.

Consumer Price Inflation (CPI) statistics

Following publication of the April 2025 CPI figures on 21 May, an error was discovered in the licensed vehicles data provided by the Department for Transport which had been used to calculate the April Vehicle Excise Duty (VED) component.

The incorrect data overstated the number of vehicles subject to VED rates applicable in the first year of registration. This had the effect of overstating the headline Consumer Prices Index including owner occupiers’ housing costs (CPIH), CPI and Retail Prices Index (RPI) 12-month rates for April 2025 by 0.1 percentage points. The ONS has used the correctly weighted data from May 2025 figures onwards.

This error is isolated to one component dataset that is used to calculate the VED index. However, the ONS is reviewing its quality assurance processes for external data sources in light of this issue.

Producer Price Inflation (PPI) statistics

The then National Statistician wrote to you in April regarding the quality challenges facing PPI statistics. On 10 July 2025 we published an update on progress towards resuming publication of PPI and SPPI bulletins. We have published an indicative PPI/SPPI dataset and we intend to reinstate full publication of our monthly PPI and quarterly SPPI bulletins in October 2025. At this time, once assured of quality, we also intend to apply to the Office for Statistics Regulation to reinstate official statistics accreditation status of the data.

Please do let me know should you have any further questions.

I am copying this letter to Simon Hoare MP, Chair of the Public Administration and Constitutional Affairs Committee.

Yours sincerely,

Emma Rourke

Office for National Statistics correspondence to the Treasury Committee on economic statistics

Dear Dame Meg Hillier,

Thank you for your letter of 26 March. Please find in the enclosed annex answers to your questions relating to Office for National Statistics (ONS) economic publications. As I committed in my letter to the Committee on 3 March, I also enclose an update on our plans for the Transformed Labour Force Survey (TLFS).

The ONS continuously improves methods and processes to ensure that our statistics are as accurate, timely and granular as possible and this includes thorough quality assurance. The
nature of statistics and our modernisation work to move off old technology and future proof delivery helps identify quality improvements. We encourage colleagues to raise issues and highlight any concerns with data. Where issues are identified, we communicate these as soon as we can, in line with the Code of Practice for Statistics. We work closely with statistics users and stakeholders on our methodological improvements; where there is not a consensus, we set this out transparently and welcome feedback.

Labour Market Statistics

Work to advance a programme of improvements to our labour market statistics continues to be our highest priority given their importance for economic decision making. We have successfully tested an experimental, shortened TLFS questionnaire and undertaken quantitative and qualitative research and methodological development, working closely with external experts and in partnership with our main users. Citizens are at the centre of the new design, which aims to address the quality issues communicated in previous updates by improving completion rates, representativeness, and data quality. The design and implementation approach have been endorsed by Professor Ray Chambers, Professor James Brown, the Labour Market Technical Group and Stakeholder Advisory Panel. The Stakeholder Advisory Panel includes representatives from the Bank of England, HM Treasury and the Office for Budget Responsibility, as well as independent experts.

The new design comprises a short longitudinal ‘Core’ labour market-focused survey, which takes on average 15 minutes to complete and is delivered online first, supplemented by targeted telephone or face-to-face contact for non-responders. This will be complemented by a separate cross-sectional ‘Plus’ survey to provide wider socioeconomic, household and local data. An article and technical report have been published today which provide the evidence for the new design.

Work is already under way to make the new TLFS design operational, with introduction planned across the second half of 2025. We will carry out a readiness assessment in collaboration with main users in July 2026, aiming for transition of our published headline labour market statistics in November 2026, though transition timing will be data-led and could be in 2027 if our assessment, or user needs, require more data to be collected and assessed.

The Labour Force Survey (LFS) will continue as the lead measure while further development of the TLFS takes place. The initiatives and improvements made to collection, methods, and communication have led to LFS quality improvements, including quarterly person data reweighted back to 2019 using updated population estimates in December 2024; achieved individual responses to the LFS (UK including imputation) have now increased to 63,069 in October to December 2024 from 44,238 in July to September 2023, with further increases expected over the coming months.

Office for Statistics Regulation Report

On 7 April, the Office for Statistics Regulation (OSR) published an interim report on their systematic review of ONS economic statistics. We recognise and share their concerns about data quality and are addressing these as a matter of urgency. Our new Strategic Business Plan published in early April includes a renewed focusing of resources on our core economic and population statistics.

I am copying this letter to Simon Hoare MP, Chair of the Public Administration and Constitutional Affairs Committee.

Yours sincerely,
Professor Sir Ian Diamond

Response to the Committee’s letter of 26 March 2025

Trade statistics

Two separate and unrelated errors in UK trade statistics were recently identified during our routine quality assurances processes, one related to trade in goods data delivered to the
ONS by HM Revenue & Customs (HMRC), and one related to trade in services data processed by the ONS. Both errors were fully corrected on 28 March 2025 as part of the postponed UK Trade release, which now resumes its regular publication schedule, as well as being incorporated into the Quarterly National Accounts and the Balance of Payments. Additional quality assurance procedures, such as further congruence checks, have been put in place to reduce risk of re-occurrence.

Trade in goods

HMRC trade data and ONS trade data are published on different methodological bases: HMRC report trade based on goods physically moving across the UK border (known as a “physical movement of goods” basis) and the ONS report trade based on how goods change ownership between residents of different countries, which may involve the goods not physically crossing a border (known as an “economic ownership” basis). This difference in methodological approach complies with international standards. As a result, the monthly data will always differ.

When HMRC delivered the annual microdata to the ONS in December 2024, this was compared with the monthly deliveries as part of our routine quality assurance. A discrepancy was identified relating to the January 2023 reference period onwards, which was escalated to HMRC. Working with HMRC to understand the cause of the discrepancy and whether an error had occurred, HMRC determined that some imports data related to a specific Customs Procedure Code had been erroneously excluded from datasets sent to the ONS. The issue was caused by a technical change being implemented in error to the long-standing process used for extracting imports information shared with the ONS.

HMRC resolved the cause of the error in the data feed and provided the ONS with the correct data on 22 January 2025 for periods January 2023 to November 2024 (and on 18 February 2025 for period December 2024). On receipt of the data, we undertook further processing to bring it onto the required methodological basis. Once the indicative impacts of the error were understood and could be shared with users, this error was communicated by a public notice on 13 February 2025, in compliance with the Code of Practice for Statistics. The Code states that users should be promptly notified of errors or revisions, and that ‘corrections that result from errors, should be explained alongside the statistics, being clear on the scale, nature, cause and impact’.

Trade is one of the components within the expenditure measure of GDP. Due to the integrated nature of the National Accounts, the earliest a correction could be made was in the Balance of Payments and Quarterly National Accounts releases which were published on 28 March 2025. In light of the trade in goods error and reference periods impacted, the ONS exceptionally updated the National Accounts revisions policy to allow revisions back to Q1 2023 in the National Accounts publications.

Trade in services

A separate error was identified in our International Trade in Services (ITIS) survey results processing system, which impacted services imports and exports estimates from 2023. The error was identified as part of our quality assurance of the trade in services data feeding into National Accounts, when large data movements were identified following results processing. Due to the scale of the revisions, we undertook a deep dive into our systems which identified that some data related to some of our quarterly survey respondents had been erroneously excluded. This was confirmed as an error on 12 March 2025, 2 days prior to the announced publication date. The system issue was promptly rectified, with further processing required to re-run all affected reference periods and bring through all relevant data. The error was announced by a notice published on 13 March 2025, which included indicative impacts of the trade in services error, as well as communicating the decision to delay the 14 March 2025 monthly UK Trade bulletin.

This enabled us to bring all corrected trade data for both goods and services together on 28 March 2025 at the same time as the Balance of Payments and Quarterly National Accounts releases, the earliest a correction could be made in line with the National Accounts revision policy.

Producer Price Index and Services PPI statistics

Several business prices statistics, including the Producer Price Index (PPI), Export Price Index (EPI), Import Price Index (IPI) and Services Producer Price Index (SPPI), collectively referred to as the Producer Price Inflation (PPI) statistics, have been affected by an error with the way certain year-to-year linking methods were applied to the underlying data. This issue was identified as part of an ongoing programme to modernise the ONS’s statistical processing systems. Consumer prices series (CPI, CPIH and RPI) are completely unaffected.

The weights for business prices series used to be updated every five years to reflect changes in the economy. Starting with the publication in November 2020, these statistics were moved to an annual chain-linking methodology, which is the method of updating weights on an annual basis and statistically linking them to produce a time series which reflects changing sales patterns more quickly than under the five-year method. This move to increase accuracy and reliability was implemented alongside several other related methodological improvements.

The ONS has recently commenced a programme focussed on modernising our legacy statistical processing systems for business prices. As part of the preparation for this work, in mid-February we identified a potential issue with the chain-linking methods used to calculate these indices, including the treatment of item level price relatives (the ratio of an item’s price at a given time to its price at another time). Additional investigation, with the support of internal and external methodological experts, confirmed that the method had not been implemented as intended in 2020 and did not align with best practice. As soon as this quality assurance was complete, the ONS issued a public notice on 21 March 2025 and made key stakeholders aware of the problem and its expected implications. We subsequently paused the publication of PPI and SPPI statistics to rectify this issue, starting with the publication due on 26 March 2025.

This work was part of a broader work programme by the ONS to improve the quality of our PPI statistics, most recently in response to a suite of OSR recommendations. These have focussed on a number of specific areas, including:
• sampling
• data validation methods
• revisions review
• non-survey data sources
• imputation
• refining published data, and
• updating the Quality and Methodology Information (QMI).

OSR identified, and the ONS agrees, that further investment in business price statistics is needed. There remains a significant element of processing on legacy technology systems, primarily focussed on the processing of the item level price data submitted by our respondents. However, constrained resources may impact the pace at which we can move production off legacy systems.

The ONS’s latest assessment of the impact on PPI and SPPI

This problem affects the years from 2008 onwards. However, investigations suggest that the main impact on annual producer price inflation rates was in 2022 and 2023, because of the large movements in relative prices during that period.

As noted in the statement of 21 March 2025, whilst it is too soon to calculate the overall impact, our current assessment is that while the effects are likely to be mixed for different products and industries, we would expect the headline output PPI level to be revised upwards. Conversely, the headline SPPI level is likely to be revised downwards.

Plans for publication to resume and quality to be restored

The ONS fully recognises the challenges some users will face from the pause in our monthly business prices publications. However, given the number of series affected, and the legacy systems described above, our current corrective action is focussed on two principal workstreams:

• In the short term, we have chosen to prioritise correcting the detailed price deflators which are needed for high priority economic statistics, a substantial proportion of which rely on underlying inputs from PPI, IPI, EPI and SPPI. These include the inputs needed for our 2025 Annual National Accounts (Blue Book and Pink Book) revisions.

• Further ahead, the ONS will look to restart publication of monthly PPI and quarterly SPPI during summer 2025. The longer time required reflects the need for a significant rebuild of a fragile processing system, and time required to do sufficient quality assurance on the outputs.

The ONS is currently consulting actively with experts from our Technical Advisory Panel on Consumer Prices and key stakeholders (both internally to the ONS and externally) and will publish further updates in due course as these two workstreams progress.

Defined benefit (DB) pension wealth

Modelling defined benefit (DB) pension wealth is a complex area of economic statistics, particularly given wider changes to the economy and the heterogeneity of public sector pensions given changes to the schemes over time. To accurately estimate current values on future pensions promises both before and after retirement we need to make assumptions and methodological choices. We keep our methods under regular review, to ensure they continue to be fit for purpose should the wider economic or pensions context change.

The ONS commissioned the Government Actuary’s Department (GAD) in 2023 to review the modelling approach for valuation of defined benefit pension wealth as used in the Wealth and Assets Survey (WAS). This review was in response to the changing economic context in the UK, along with user feedback on assumptions and inputs into the DB pensions model, including from the Institute for Fiscal Studies (IFS). As part of this review, the ONS asked GAD to make recommendations on:
• the discount rate to use in the model,
• how increases to pensions should be recognised in the model,
• what review processes would be appropriate to maintain the model going forwards,
and
• valuing defined contribution (DC) pensions in payment wealth using the DB pensions
model.

In line with government user needs, stability was the primary objective, with a secondary objective being consistency in approaches used to determine the value of other types of wealth, and further objectives of practicality, durability, and continuity. Government user need for minimising undue volatility when valuing DB pension wealth was first highlighted to the ONS by WAS consortium members following the 2008 financial crisis. The previous market-based approach for DB pension valuation used in WAS waves 1-2 led to large changes to published pension wealth estimates between survey waves, which did not wholly reflect actual growth in respondents accrued pension amounts or entitlements, and as such more stable “market immune” approaches were preferred.

GAD’s review concluded that no discount rate could give the best outcome against all of the objectives. Consideration of relative priorities led to a recommendation to use a consistent Superannuation Contributions Adjusted for Past Experience ‘SCAPE’-based discount rate in all parts of the pension model. The recommendations were discussed with a range of stakeholders, including the IFS, during the review and ahead of their report. It was not possible to achieve consensus on the methodological approach, however key government users showed consistent preference for stability. Recommendations were subsequently implemented in our 2020-2022 Household Total Wealth in Great Britain statistics, published in January 2025.

We strongly refute the characterisation of this methodological change as ‘an error’, rather that there is a difference in views on the appropriate methods to apply. Further detail around implementation of recommendations and impact on our wealth estimates were published ahead of the statistical release. In line with GAD recommendations, the ONS plans to undertake a full model review of WAS pension methodology every third round and initiate “out of cycle” reviews should major unexpected economic events occur. Meanwhile, we will continue to engage with WAS consortium members and stakeholders via relevant technical and expert user groups.

Office for National Statistics follow-up written evidence to the Treasury Committee on economic statistics

Dear Dame Meg Hillier,

Thank you for your letter of 14 February, following up on our evidence session with your Committee on 4 February. As I mentioned during the session, we are grateful for your interest in this important area of work.

In response to the request in your letter, I can commit to providing regular updates on the progress of the Labour Force Survey (LFS) and the Transformed Labour Force Survey (TLFS), and any emerging issues of note, to both this Committee and the Public Administration and Constitutional Affairs Committee (PACAC). In the first instance, I will write to the Committee with an update following the upcoming decision regarding the future timings of the TLFS.

During the session, I promised to write regarding two further points.

Budget

We discussed the efficiencies the Office for National Statistics (ONS) made in 2024. Following clarification from colleagues, I wanted to confirm that by the end of the 2024/25 financial year we estimate that the annual effect of cumulative efficiencies and savings generated across the SR21 period will be £39.2m. This equates to 9.9% of forecast net expenditure estimated at £396m for 2024/25. I would be grateful if the transcript could be updated accordingly.

Public contact details

We also discussed the impact of contacting the public via telephone during the pandemic, the potential of using other contact methods to improve survey response rates and if the ONS requires additional powers to access contact details. The ONS currently uses both mobile phone and landline numbers to contact respondents. The Transformed Labour Force Survey (TLFS) sample of household addresses is telematched using commercially available datasets of mobile and landline numbers. This approach typically provides a phone number of varying quality for approximately 30% of addresses. Email addresses are less useful as they cannot be linked to an address, and we are not assured of their security, so we only use these where they have been provided to us by the respondent during our first interview with them. This enables us to contact them to ask them to complete later waves of the survey.

I am content that the ONS currently has the legislative framework it requires to obtain the data we need to deliver our surveys and contact respondents. Our new Survey Innovation and Research hub will accelerate our work this year to increase response rates and maximise respondent engagement across our surveys.

Thanks again for interest and as I mentioned in the session, I would be very happy to welcome you and your Committee to our office in Newport, Wales.

I am copying this letter to Simon Hoare MP, Chair of PACAC.

Yours sincerely,

Professor Sir Ian Diamond

Office for National Statistics oral evidence to the Treasury Committee on economic statistics

On Tuesday 4 February, Professor Sir Ian Diamond, National Statistician, Mary Gregory, Director for Population Statistics and Richard Heys, Deputy Director for Productivity, Investment and Research at the Office for National Statistics gave evidence to the Treasury Committee for their session on economic statistics.

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

Office for National Statistics correspondence to the Treasury Committee on labour market statistics

Dear Dame Meg,

As National Statistician and Chief Executive of the UK Statistics Authority, I am responding to your letter of 21 November regarding the Labour Force Survey.

The Office for National Statistics (ONS), as the UK’s National Statistical Institute (NSI) and largest producer of official statistics, delivers independent and relevant statistics and analysis, continuously responding and improving to ensure these are of high quality and meet user need. The ONS is delivering a programme of improvements to increase the quality of data from the Labour Force Survey (LFS). While we are starting to see the positive impacts of these recovery efforts, our continued work to stabilise the data in partnership with key users is our highest priority. Alongside this, we are progressing our strategic solution to the international fall in survey response rates and sizeable inflationary impacts, through the online-first Transformed Labour Force Survey (TLFS).

Recovery of the LFS

The sharp fall in survey response rates, a long-term trend that rapidly accelerated during and after the pandemic period, has been a significant challenge in the UK as well as for other NSIs around the world. There are many reasons for this decline, including increased cautiousness around the sharing of personal information, declining trust in government and public institutions, a reluctance to have interviewers inside homes and increased challenges accessing secure/gated properties.

The LFS involves five ‘waves’ of data collection – an initial survey interview, then eligible households repeat the survey each quarter on four further occasions to track changes in employment over time. The voluntary nature of the UK’s LFS as well as its significant length (around 45 minutes per wave per household on average) have meant LFS response rates have been more heavily impacted than other countries.

We are acutely aware of the significance of reliable labour market statistics as a source of evidence for economic decision making and that some indicators are only available from surveys such as the LFS. We do not underestimate the challenges involved with the use of data to inform the decision making of central banks in times of uncertainty, as the 2023 Bernanke Review set out.

Following the disruption of the pandemic and a period of substantial inflationary impacts with difficult prioritisation decisions, the ONS worked to re-establish high quality survey data collection, by re-introducing face-to-face data collection survey by survey, re-training interviewers and re-establishing the operation. By 2023, it was evident that societal behavioural changes as a result of the pandemic had influenced the data collection environment and were contributing to the survey quality not recovering at the rate anticipated. At its lowest point in 2023, the LFS response rate was 17.4% (UK, including imputed cases). This had significant implications for the quality of the statistics derived from the survey, resulting in the temporary suspension of the LFS as a source of labour market data in October 2023. Due to the dwindling response rates, we introduced the LFS Recovery Plan to restore the quality of its estimates, focusing on data collection improvements and methodological enhancements. The complexity of the survey and issues meant the interventions would take time to fully embed in the survey and subsequently improve the quality of the estimates.

As part of data collection improvements, we increased the targeted sample by over 50% in January 2024 from 16,700 to 25,800 new households each quarter, returning it to the levels adopted in the aftermath of the pandemic period. We increased face-to-face interviewing and the incentives for participation from £10 up to £50, with a particular focus on Wave 1 responses (our initial collection with a household). As a result, the achieved sample is now 15,000 higher than at its lowest point, an increase in the overall UK response rate from 17.4% in Jul-Sep 2023 to 24.6% in Jul-Sep 2024. We are currently recruiting an additional 150 interviewers to further support Waves 2-5.

Methodological enhancements have focused on the weighting of survey results to support quality. Weighting utilises population projections and estimates to ensure data collected from only a sample of the population produces outputs that are representative of the entire population. Population projections are usually provided once every two years but during this period they were impacted by the unusual migration pattern following the pandemic and the effects of changes to the immigration system following the UK’s exit from the EU. Therefore, the ONS introduced an additional partial re-weighting in February 2024 as well as for December 2024. LFS quarterly person data has been reweighted back to 2019 using updated population numbers. An article to illustrate the impact was published on 3 December 2024 and full results will be released on 17 December 2024. Reweighted two-quarter longitudinal LFS person outputs are expected in spring 2025. A more complete reweighting of all LFS data will follow during 2025/26, as well as Annual Population Survey (APS) data which makes use of LFS responses and additional sample boosts to deliver regional and local level statistics.

As noted above, the wave nature of LFS means data collection and methodological improvements take time to feed through fully into the estimates. Autumn 2024 has seen significant volatility and we have supported users to navigate the data uncertainty in this interim period. This includes being clear on our website, social media and broadcast media interviews on the data limitations and how they affect the use and interpretation of LFS estimates. Our expanded commentary recommends that, at this time, users make full use of all available data sources when assessing the labour market, such as HM Revenue & Customs (HMRC) data on the number of people on payrolls and the number of workforce jobs, which the ONS has developed and published. We highlight that these sources are currently likely to be providing a better read of recent trends in employment, particularly of employees.

Acknowledging the complexities of the challenges and the vital importance of these statistics to users, we have strengthened our engagement with stakeholders and channels for external challenge, support and expertise to inform our approach. We introduced a new monthly Technical Engagement Group in October 2023 with members from the Bank of England (BoE), HM Treasury (HMT), Office for Budget Responsibility (OBR) and the Department for Work and Pensions (DWP) to provide a forum to discuss upcoming developments and improvements in an open and transparent manner, which is providing invaluable input and feedback on our plans for both LFS and TLFS. In addition, in June 2024, we established a Stakeholder Advisory Panel on Labour Market Statistics chaired by Professor Jonathan Portes with representation from academics, think tanks, core government organisations and the Devolved Administrations, to provide independent advice and guidance on the production, publication, uses and application of labour market statistics and their technical aspects.

One focus has been on exploring how survey response challenges might be introducing potential bias in the LFS estimates, in particular for young people and ethnic minorities. This was considered at the Stakeholder Advisory Panel on 24 October 2024 and will be further addressed in a special session later this month that will also be attended by members of the Technical Engagement Group to assess whether any further methodological actions are necessary. We plan to extend our work on the coherence of key labour market data sources, with a further publication planned in the new year.

In summary, progress has been made in recovering the LFS with the achieved sample now significantly higher and the incorporation of the latest population information into the estimates. The major changes we have made to the LFS will be fully included through all five of the survey waves by the first quarter of next year, which will inform the LFS estimates for publication in May 2025.

Progress on the TLFS

Our long-term solution to falling response rates and quality challenges on the LFS is the development of an online-first evolution of the LFS called the Transformed Labour Force Survey (TLFS). The ambition of the TLFS is to improve the quality of our labour market statistics, provide a more adaptive and responsive survey to meet user needs and enhance respondent experience. While the online-first nature of the survey enables a far larger sample size than the LFS, to ensure quality of the survey and reduce bias, ONS field force still visit 3,855 addresses a week on the TLFS to encourage them to complete the survey, referred to as ‘knock-to-nudge’.

The ONS started a full parallel run of the TLFS alongside the LFS in October 2023 to determine whether the performance of the survey met operational and statistical quality criteria. Compared with the LFS, in this pilot the TLFS provides a larger achieved sample (quarterly datasets include more than double the number of people than LFS), a higher response rate at every wave (40% compared to 36% at Wave 1) and the potential for more stable weighted outputs. However, there was bias in response towards older age groups, higher levels of partial responses compared with the LFS, and quality issues with the online response to some more complex variables such as respondents’ occupation and the industry in which they work.

The analysis of the parallel run data for headline labour market outputs demonstrates differences in headline labour market outputs between the two surveys. While some of this difference is expected (e.g. the TLFS uses the latest labour market definitions and updated methods which differ from those on the LFS), we have a strand of work to further account for the differences and identify adaptations, working with users to understand the implications for outputs and manage how data are used in their own systems.

As part of our open approach and bringing in of external challenge and expertise around the survey design complexities, the ONS has enhanced the role of the Methodological Assurance Review Panel (MARP). Through MARP, we commissioned Professors Chambers and Brown to undertake a methodological and design review of the TLFS in April 2024. This review recommended new work on a shorter online survey with the capacity for designed modular additions, as well as the need to continue the parallel run for five quarters to assess how the surveys captured seasonal variations in the labour market. Based on this review and feedback from both internal and external users, in July 2024 we announced an extension of the parallel run of the LFS and TLFS and plans to test further design improvements within the TLFS.

Since July we have completed a series of discrete online design tests to assess the impact of a shorter TLFS questionnaire that aims to reduce average household completion time from 37 minutes to around 15 minutes. The test also included questionnaire changes to address bias, rates of partial response and collection of complex variables, as well as the use of a QR code to ease citizen response.

Early indications show positive outcomes from the design tests with some areas for development. We are now conducting a thorough evaluation and reviewing the content of the shorter survey to ensure it meets key labour market requirements whilst reducing respondent burden as much as possible. Pending evaluation of the test activity, an examination of our assumptions and engagement with our expert groups, there are several scenarios for when we are able to transition from using the LFS to using the TLFS, involving the implementation of the shorter survey and further periods of parallel run. Therefore, we cannot yet set out a firm timetable for transition but will layout potential timetables in quarter one 2025. While one scenario based on a shorter questionnaire is 2027, my ambition is to transition in 2026, with the timings being determined in collaboration with key users to ensure the TLFS meets their quality and system needs.

The development of the TLFS has provided a continuous opportunity for the ONS to learn and refine how it delivers this complex transformation project. In summer 2024, the ONS conducted an internal lessons learnt exercise including historical cultural issues. Our colleagues are committed and passionate about producing high quality labour market statistics and the exercise provided colleagues with the opportunity to contribute views with candour from across the totality of the project. A summary of the lessons learnt and the initial actions taken to address the issues is at Annex A. In particular, we strengthened technical and methodological leadership, including appointing two experienced senior colleagues to shore up analytical leadership capability. Additionally, the Director for Methodology is supporting oversight on the conditions for quality and the journey towards stability of the TLFS. We also raised awareness of channels that colleagues can use to escalate known issues and are promoting a culture that encourages the surfacing of risks and invites constructive challenge. While the report suggested a pause in development of the TLFS, the critical nature of the statistics and the decisions that flow from them means we are redoubling our efforts to improve and roll out the TLFS as soon as is practicable, with a continued focus on the wider issues raised.

International comparisons and further development

While some other countries do achieve higher response rates on their equivalent labour market surveys, many NSIs have also seen falling response rates in recent years. We are continually engaging with, and learning from, partner NSIs to boost response rates and reduce any response bias. The insights we receive from these NSIs are contributing to the ongoing evolution of TLFS design, specifically on the shorter survey, which harnesses the benefit of large-scale, online, self-completion.

The Independent Review of the UK Statistics Authority (the Authority) conducted by Professor Denise Lievesley earlier this year recommended that the Authority explore the consequences of mandatory completion of the LFS. Mandating would align with the census and business surveys and is akin to the civic duty of undertaking jury service. A move to mandating responses to the LFS would require legislation (as is the case for census and business surveys) and is not something the ONS can consider alone. We welcome a broader national conversation about the importance of citizens being represented in the country’s statistics and championing the value of data as critical national infrastructure.

Given the strategic challenges that surveys are facing, we are establishing a new Surveys Innovation Hub, expanding our portfolio of surveys research and are continuing to work closely with the Economic and Social Research Council (ESRC) funded Survey Futures project. On Survey Futures, the ONS is collaborating with other survey providers to explore the feasibility of using names and contact details to cross-reference with our address database to make contacting individuals easier. We are conducting a suite of research to improve our ability to reach the public, build trust and gain consent to overcome barriers to completion of our household surveys. We are also exploring the use of alternative data sources in our end-to-end survey design, for example enabling us to adapt our samples and focus operational effort on contacting those population sub-groups that are typically less likely to engage in our surveys.

The common picture across many countries, and the UK’s survey sector (public and private) as a whole, of falling response rates suggests that we can no longer rely on surveys alone. While there are some questions that only can be accurately answered by large surveys, such as the distinction between unemployment and inactivity, we have already begun publishing other data sources to build a fuller picture of the labour market. The Integrated Data Service (IDS), a functioning cross-government hub that allows full value to be extracted from data collected across the public sector and beyond, will seek to identify, share and link securely these and other data sources across government to further build our understanding of the labour market. LFS data and HMRC tax data (PAYE RTI) were linked through the IDS in November 2024 and this integration of survey data and administrative sources will be used to inform labour market quality assurance and survey methods. More effective sharing of de-identified administrative data across government will further improve the quality of statistics and evidence to support national and local decision making.

Working in partnership with our key stakeholders, and learning from other countries, we will extend our exploratory work on integrating survey and administrative data to produce a holistic picture of the UK’s labour market. This includes our plans to produce Labour Market Accounts, which aims to provide a comprehensive understanding of the UK’s labour market through the optimum balance of survey and administrative data.

Resourcing

As with other parts of the public sector, the Authority’s funding position throughout the Spending Review 2021 (2022/23 to 2024/25) has been one of constraint overall, including flatlined core funding, ring-fenced budgets, and substantial inflationary impacts. Operating within our budget in this context has led to difficult prioritisation decisions and the need to deliver efficiencies and cost savings across the organisation. Our efficiency and cost savings figure was approximately £11.4m for 2022/23 and £17.8m for 2023/24. We plan to deliver an estimated £12m in efficiencies and cost savings in 2024/25 taking the cumulative impact for the Spending Review 2021 (SR21) period to over £40m.

The work to prioritise activity and reduce costs started in 2022/23 and continued through 2023/24, impacted by the cost of increased colleague salaries and a notable inflationary effect on our cost bases, including through surveys. Significant cost saving measures to remain affordable, the need to dual run the LFS and TLFS and restrictions from ring-fenced budgets curtailed our ability to use the totality of organisational funding and dedicate the resources we would have ideally wanted to our social surveys operation.

The survey recovery plan in late 2023 set out how existing resources could be utilised to pivot to support the LFS/TLFS and other surveys to start to redress the downward trend. Given the skills and capabilities required to drive improvements and the scarcity of options, we further prioritised within the survey workforce. Simultaneously we set out our plans and a request for additional finance to HMT for the Surveys Quality Recovery Plan 2023/24, which was supported and the funding made available.

Prioritisation of surveys recovery formed a key component of our recent Spending Review 2025 (SR25) Phase 1 submission. Whilst funding for 2025/26 will remain at the same level as 2024/25 (flat cash) as part of our financial objectives we have been supported in significantly reducing the level of ring-fenced funding we receive as a proportion of the whole. This added flexibility will be vital for us in being able to pivot resources at pace in future and enables us to implement an LFS sustainability plan.

Throughout 2023 and 2024, the ONS’s three highest field data collection priorities have consistently been the labour force surveys (LFS and TLFS parallel run) and the Living Cost and Food Survey. Our decisions to not reapply for the contract to collect data for the National Survey for Wales for the Welsh Government in March 2023 and reduce interviewer resource on its financial surveys in February 2024 (including pausing the Survey of Living Conditions) reflect these priorities. Other surveys have also seen reduced support.

The additional investment allocated in the last year to recover the LFS and the ONS’s wider social surveys is enabling significant field interviewer recruitment. Our permanent face-to-face field interviewer community has grown from 477 (Dec 2023) to 544 (Nov 2024). Within the same timeframe we have also built up an agency workforce of 130 temporary field staff specifically to complete the ‘knock-to-nudge’ function on the TLFS, which releases an equivalent number of fully trained interviewers to support recovery across ONS’s social surveys. Compared with the 145 interviewers in October 2023, in the last month 275 face-to-face interviewers have worked on the LFS (across all waves). Recruitment continues, with a further 28 interviewers confirmed to start on the LFS in December to support improvements in Waves 2-5 response and recruitment ongoing to deliver the full requirement of 457 face-to-face interviewers across all LFS waves by the end of March 2025.

As an organisation, we fully comprehend the critical importance of high-quality labour market statistics and recognise the significant impact the response challenges are having on the reliability of data informing our key outputs. We are confident that by continuing to seek out internal and external challenges and expertise, progressing the improvements already made and delivering the solutions outlined above in partnership with our key stakeholders, we will be able to recover the quality issues with the LFS and continue our progress towards transition to the TLFS. Achieving a successful outcome from these programmes of work is the top priority for the ONS.

Yours sincerely,

Professor Sir Ian Diamond

UK Statistics Authority correspondence to the Treasury Select Committee on revisions within Blue Book 2023

Dear Ms Baldwin,

Thank you for your letter of 14 September 2023 regarding revisions within Blue Book 2023. To take your four points in turn:

An overview of the main drivers of these revisions, and whether there were particular circumstances (including those arising from the pandemic) in 2020 and 2021 that made early estimates of GDP especially uncertain.

As I outlined in the Financial Times recently, The UK’s official economic statistics are rightly seen as among the world’s best. This includes the recent upgrade of our official estimates for economic growth in the pandemic years of 2020 and 2021.

It is certainly true that the large shifts in activity, and the means of delivering that activity in many cases, made it harder for all statistical agencies to measure economic activity during the pandemic. But it is equally true that the larger revisions we have seen for our 2020 and 2021 GDP estimates are proportionally in line with the much larger declines and growths seen over these periods as well.

The main drivers of revision in our 2020 and 2021 GDP estimates come from these changes in activity. For example, the health service had increased costs to deliver a reduced amount of output (e.g. protective equipment, and extra staff) during 2020 which increased the intermediate consumption and decreased the value added of the health sector. During 2021 these intermediate consumption costs continued to rise, but more slowly, while output volumes saw a massive increase from the return of mainstream health activities such as elective surgeries but also from the COVID vaccination programme and so value added then grew strongly.

Secondly retailers and wholesalers also changed the way they operated with specialist stores being forced to close or be limited to click and collect, and a much larger proportion of transactions were completed on-line. This again changed the retail and wholesale margins element in 2020 and then this partially swung back the other way in 2021 as retailers, especially those selling clothing and textiles saw a strong recovery in 2021.

The third driver of revisions was inventories data, where our annual, more complete, data sources gave information that businesses undertook more stock building that previously thought at the start of the pandemic when restrictions were quickly introduced. For more detail, please see our article on the 1^st September 2023.

An explanation of what has been learnt from these revisions about what may have been wrong with the earlier estimates, and what improvements the ONS will implement from what it has learnt.

Our early monthly and quarterly estimates for GDP followed the standard ONS procedures using the available ONS data sources. The challenge was the sheer scale of fundamental change in the economy in such a small space of time. The ratio of intermediate consumption to final output is usually very stable, and as a result ONS did not have any data sources for changes to this ratio for periods beyond the latest supply and use balanced year, which was 2018 at the time the pandemic started.

We have now sourced intermediate consumption data on a more timely basis for the health service with quarterly and annual data available within a month or two of the reference period. We are also investigating the use of administrative tax data (VAT) on purchases by businesses as a means of identifying changes in the intermediate consumption ratio more quickly across industry.

We have welcomed the recently announced review by the Office for Statistics Regulation, and look forward to their recommendations as one of the themes relates to “Potential improvements to early estimates of GDP enabled through enhanced access to data”.

An outline of whether the ONS expects similarly large revisions to GDP data for 2022, in either direction, and more broadly whether the ONS sees revisions of this size as exceptional or typical.

The revisions profile of GDP estimates for 2022 and for the first half of 2023 were published on 29 September in the Quarterly National Accounts. There was little to no revision to previously published GDP from 2022 onwards, and we saw only 1 out of the last 6 quarters have been revised. The quarterly growth rate of GDP across all of 2022 was unrevised, while growth in 2023 Q1 was revised up 0.2 percentage points and 2023 Q2 was unrevised. With this release, we observed that revisions for that period are more typical of the pre-pandemic era.

As part of our continual improvement, we have already implemented the new health intermediate consumption data to reduce the potential for revision in this large sector of the economy. While other work looking at wider intermediate consumption continues, we have proactively reviewed areas such as rail transport and air transport to ensure that the intermediate consumption ratio of 2021 does not apply directly to 2022 as well, where we can see clear evidence of a recovery in those sectors. As part of the OSR review of GDP, ONS has committed to provide additional revision analysis of our GDP estimates in October 2023.

Given the ONS notes that it has completed its revisions to GDP using a Supply and Use Table framework ahead of many other countries, what it expects may happen in comparator countries when they undertake their own similar analysis.

Each country will follow different revision policies and practices, which can result in their estimates being revised at a later date according to their own needs. The timing and impact of revision changes will depend on data availability and magnitude, with large annual structural surveys being the data source needed to make detailed product and industry changes. These annual data sources come with lags on timeliness, often being available up to 2 or 3 years later.

We have now seen revisions to GDP estimates published by other countries. As we previously announced, the 2021 GDP estimates for the UK were revised to 8.7 percent growth from our initial estimate of 7.6 percent growth, a revision of +1.1 percentage points. The Spanish Statistical Agency has now published 6.4 percent growth in GDP for 2021, compared with the previous estimate of 5.5 percent, a revision of +1.1 percentage points. The Netherlands have now published 6.2 percent growth for 2021, revised from an initial estimate of 4.9 percent, a revision of +1.3 percentage points. Italy, have now published 8.3 percent growth for 2021, revised from an initial estimate of 7.0 percent, a +1.3 percentage point revision. All are a similar magnitude of upwards revision for 2021 as observed in the UK context. Conversely, the United States have now published 5.8 percent growth for 2021, compared to a previous estimate of 5.9 percent growth, a revision of -0.1 percentage points [ONS own calculations based on published US data from www.bea.gov]. This highlights that revisions can differ across countries.

Please do let me know if you have any further questions about this topic or if I can be of assistance to the Committee on any other matter.

I am copying this letter to Rt Hon Greg Clark MP, Chair of the Science, Innovation and Technology Committee, and William Wragg MP, Chair of the Public Administration and Constitutional Affairs Committee.

Yours sincerely,

Professor Sir Ian Diamond

Office for National Statistics correspondence to the Treasury Select Committee on insurance industry inflation

Dear Ms Baldwin,

Thank you for your letter of 8 June 2023 regarding insurance industry inflation. To take your questions in turn:

How the ONS calculates insurance inflation for the purposes of the Consumer Price Index, and whether differences in methodology account for the differences between ONS and ABI measures of inflation.

Our data sources and methods are publicly available on our website, and you may find our Consumer Prices Indices Technical Manual helpful. As a general point, our inflation measures are designed to capture inflationary pressures only, thus we follow a fixed basket approach. This means we compare like for like each month, and any changes that affect the quality of a good or service are adjusted out. So, for example, in the case of insurance, if a consumer amends a policy to (for example) remove an optional extra then this would be treated as a change in quality, rather than a change in price. This is consistent with international best practice.

The manual explains that the Office for National Statistics (ONS) measures two major types of insurance: home contents insurance and car insurance. The car insurance price index is a combination of two separate indices, one for fully comprehensive insurance and the other for third party, fire, and theft insurance.

Each of these is split further into unpublished price indices for specific car insurance companies. Expenditure data is used to weight these indices together and to ensure that a representative sample of insurers is selected. Each index is constructed from actual insurance price quotes for new policies provided by a third-party company. These quotes are returned for a database of customer profiles. For car insurance, the customers in question cover a wide range of ages, driving experience, regions, and vehicles. For the home contents insurance index customer profiles cover a wide range of regions, the material used for the construction of their house or flat, the number of rooms, the number of occupants and many other attributes.

We strive to continuously improve our statistics and are undertaking a programme of transformation by identifying new data sources, improving our methods, and developing our systems to ensure CPI and CPIH are of the highest possible quality. We are currently working on an ambitious programme to improve prices for used cars, rents and groceries using new, more comprehensive data sources.

Insurance data is one of several areas we are considering for inclusion in future development work. We are in discussions with the Association of British Insurers (ABI) who have provided historical aggregate data. This data is a simple average price of all policies. While the data is more comprehensive as it covers all policies (both new policies and renewals) it does not control for changes in the mix of products bought over time, which means we cannot determine if changes in the average price reflect true price changes or changes in the level/type of cover. This may explain some of the differences between ONS and ABI data and is an area we are looking to explore further.

Whether it is true that ONS insurance inflation is based on quotes, not actual prices paid. If so, what is the justification for using that method?

The ONS insurance inflation is based on quotes. The international guidance explains that it would be ideal for transacted prices to be used while acknowledging that this is not always possible, meaning that using the advertised prices of products offered for sale is often admissible. As such, it is not uncommon for the ONS to collect advertised prices, in fact we use prices listed on shop shelves, websites or quoted in a call for a wide array of goods and services. The use of price quotes should only distort measures of inflation if the relationship between quotes and prices changes significantly; even if quotes are typically higher or lower then final prices paid, there would be no effect on inflation as long as that level difference was consistent over time. We are not aware of any evidence that the relationship between quotes and prices has changed.

An additional consideration for us is the necessity to have timely prices in order for us to be able to calculate monthly indices. Consumer price indices are published within a month of the reference period and are not revised so this places a high bar on timeliness for potential data sources. We have so far been unable to source timely insurance data using prices paid. We are working with the ABI to identify whether there are timely data sources that we could use to calculate CPI .

Your assessment of whether the ONS may be materially overstating the level of insurance inflation actually experienced by consumers.

Both the ABI and ONS data have advantages and disadvantages. While our methodology controls for changes in the quality or type of product bought in a way that the ABI data does not. Whereas the ABI data covers renewals – a segment of the market not covered by the ONS sample. It’s possible that prices in this part of the sector may have fallen following regulatory intervention in 2022, meaning our insurance index may have overstated inflation at the time the change was made. This is less likely to explain divergences in more recent data for 2023. More recent differences between the ABI and ONS measure may reflect changes in the type of insurance products bought by households (where the ONS methodology would give a clearer steer on underlying price changes). However, we cannot draw any firm conclusions at this stage and are seeking more granular data from ABI to help provide us with further insights.

The confidence intervals for each of your categories of insurance inflation.

We are currently sponsoring research to provide robust confidence intervals for consumer prices inflation. This work is still ongoing, but early analysis indicates that the standard deviation for annual inflation for ‘miscellaneous goods and services’, which includes insurance, is a few tenths of a percentage point. However, this is early partial analysis that may understate the true confidence intervals for these statistics.

Please do not hesitate to contact us if there are any further questions.

Yours sincerely,

Mike Keoghan

Deputy National Statistician for Economic, Social and Environmental Statistics

Office for National Statistics follow-up written evidence to the Treasury Committee’s inquiry on an Equal Recovery

Dear Mr Stride,

Thank you for inviting me to give evidence to your Committee on 15 September for the inquiry ‘An Equal Recovery’. During that evidence session, I promised to follow up on several points, and to answer some questions that members did not have time to ask.

Impact of the pandemic on lower-paid workers

In May 2021 we published analysis that found that those in the lowest income bracket (up to £10,000 per annum) continued to be more likely to report negative impacts to personal well-being in comparison with those in higher income brackets. These negative impacts included the pandemic making their mental health worse (18%) and feeling stressed or anxious (32%).

We have also explored the likelihood of experiencing some form of depression. In our coronavirus and depression in adults in Great Britain publication, we found that around 3 in 10 (29%) adults who reported being unable to afford an unexpected but necessary expense of £850 experienced some form of depression, compared with 11% of adults who reported being able to afford this expense. In addition, for working age adults aged 16 to 64 years, rates of moderate to severe depressive symptoms generally decreased as income increased. Around 3 in 10 (29%) working adults with a personal income of less than £10,000 a year experienced some form of depression; this was four times greater than working adults with a personal income of £50,000 or more (7%).

In our analysis of COVID-19 deaths by occupation we found that men who worked in elementary occupations (699 deaths) or caring, leisure and other service occupations (258 deaths) had the highest rates of death involving COVID-19, with 66.3 and 64.1 deaths per 100,000 males respectively. For women, process, plant and machine operatives (57 deaths) and caring, leisure and other service occupations (460 deaths) had the highest rates of death involving COVID-19 when looking at broad occupational groups, with 33.7 and 27.3 deaths per 100,000 females, respectively. Please note that this analysis does not prove conclusively that the observed rates of death involving COVID-19 are necessarily caused by differences in occupational exposure; we adjusted for age, but not other factors such as ethnic group and place of residence.

Impact of the pandemic on people with disabilities

During the evidence session, I was asked if the ONS could support TUC written evidence that said six out of 10 people who died from COVID-19 were disabled. This figure was taken from our release looking at COVID-19 related deaths by disability status in England, published in February 2021, which found that disabled people made up six in 10 (59.5%) of all deaths involving the coronavirus (COVID-19) for the period to 20 November 2020 (30,296 of 50,888 deaths). For comparison, disabled people made up 17.2% of the study population, suggesting that disabled people have been disproportionately impacted by the COVID-19 pandemic.

We have also looked at outcomes for disabled people in the UK across all areas: education, employment, social participation, housing, crime and wellbeing. Within this we found disabled people’s (aged 16 to 64 years) average well-being ratings in the UK were poorer than those for non-disabled people for happiness, worthwhile and life satisfaction measures; average anxiety levels were higher for disabled people at 4.47 out of 10, compared with 2.91 out of 10 for non-disabled people (year ending June 2020).

Impact of the pandemic by ethnicity

In terms of the differences in mortality by ethnicity, during the first wave of the coronavirus (COVID-19) pandemic (24 January 2020 to 11 September 2020), people from all ethnic minority groups (except for women in the Chinese or “White Other” ethnic groups) had higher rates of death involving the coronavirus compared with the White British population. Differences were less pronounced in the second wave, but higher rates were notable in Bangladeshi and Pakistani ethnicities. Adjusting for location, measures of disadvantage, occupation, living arrangements and pre-existing health conditions accounted for a large proportion of the excess COVID-19 mortality risk in most ethnic minority groups; however, most Black and South Asian groups remained at higher risk than White British people in the second wave even after adjustments.

In December 2020, we published an overview of the social impacts of COVID-19 pandemic on different ethnic groups in the UK. This highlighted that in April 2020 in the UK, over a quarter (27%) of those from Black, African, Caribbean or Black British ethnic groups reported finding it very or quite difficult to get by financially, significantly more than those from White Irish (6%), Other White (7%), Indian (8%) and Pakistani or Bangladeshi (13%) ethnic groups. In addition, this publication explored mental health and found that it deteriorated across most ethnic groups during the first lockdown period, but also outlined that those in the Indian ethnic group may have been particularly affected.

The relationship between economic growth and inequality

The ONS produces a range of statistics on both economic growth and inequality, and others such as the OECD and the IMF have produced analysis of the link between the two. Our data allows for an examination of broad trends in the two concepts across several years. UK National Accounts data show that real GDP grew by 19% over the ten years to 2019/20, while median household income also rose (by around 6.9%). However, over a similar period measures of income inequality stayed broadly stable, and the level of wealth inequality rose slightly (wealth data are currently only available biennially up to April 2018).

The Committee might also be interested to note that the ONS is developing wider measures that go beyond GDP, such as looking at natural capital and how much work people do for free in their own homes.

Relationship between home ownership and wealth inequalities, including the role of inheritance

The latest data we have for total wealth in Great Britain, including net property wealth, is for April 2016 to March 2018. Increases in net property wealth were largely associated with rising house prices, as well as an increasing share of homeowners who own their property outright rather than with a mortgage.

We can use Wealth and Assets Survey data to consider the relationship between home ownership and wealth. For April 2016 to March 2018, these tables show that those households where the main home is rented have median household total wealth of £33,000; those buying with a mortgage have more than 10 times this value, £353,000, and those that own outright have median wealth more than 20 times bigger than renters at £685,000.

In February 2020 we published analysis on housing tenure which showed that almost three quarters of people aged 65 and over own their home outright, where younger people are less likely to own their own home than in the past. Half of people in their mid-30s to mid-40s had a mortgage in 2017, compared with two-thirds 20 years earlier.

We also previously looked at inheritances and intergenerational transfers, which found that between July 2014 and June 2016 the median inheritance received by those in the top personal wealth quintile was £35,000, compared with £3,000 for those in the lowest wealth quintile. However, while those in the lower wealth and income quintiles were likely to receive less than those in the higher quintiles, the inheritances they received made up a far higher proportion of their total wealth. Inheritances for those in the top wealth quintile were equivalent to 5% of their net wealth on average, while in the bottom wealth quintile this proportion was 44%.

We will publish the latest (April 2018-March 2020) Wealth and Assets Survey data and analysis toward the end of this year, including modelling the impact a range of demographics such as age, sex, disability, region, ethnicity, and education level have on wealth, and analysis of living standards across generations. We will of course make the Committee aware when these are published.

Inclusive Data Taskforce recommendations

The Committee may be interested to note that in October 2020, the National Statistician established an independent Inclusive Data Taskforce of senior academics and civil society leaders with expertise in a range of equalities areas. Their task was to develop recommendations on how to improve UK data and evidence to better reflect the diversity of UK society, in particular focusing on those in protected characteristics groups and others at greater risk of disadvantage.

The Taskforce have now published their recommendations, which were developed in the context of the pandemic and acknowledge the essential role of better data in monitoring its impacts. The National Statistician has provided an initial response, including details of early work that is underway to address some of their recommendations.

Over the coming months, the ONS will be working with a range of stakeholders to develop a detailed action plan to take forward these recommendations, to ensure that we have the data that we all need, including the data and evidence we need to effectively monitor the impacts of the pandemic. This action plan will be published in January 2022.

Please do let me know if I can be of any further assistance to the Committee.

Yours sincerely,

Liz McKeown, Director of Public Policy Analysis
Office for National Statistics

Office for National Statistics oral evidence to the Treasury Committee’s inquiry on an Equal Recovery

On 15 September 2021, Liz McKeown, Director for Public Policy Analysis at the Office for National Statistics, gave evidence to the Treasury Committee for its inquiry on an Equal Recovery.

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

Office for National Statistics written evidence to the Treasury Committee’s inquiry on an Equal Recovery

Dear Mr Stride,

I write in response to the Treasury Committee’s call for evidence for its inquiry into ‘An Equal Recovery’.

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

Our submission focuses on the following questions in the terms of reference:

What are recent trends in income and wealth inequality in the face of the pandemic?
What are the trends in intergenerational inequality, and how has the crisis affected them?
How has the economic impact of the crisis affected disability, gender, and race inequality?
How has the crisis impacted on regional inequality?
Are certain regions or sectors likely to recover more slowly or have longer term economic damage and greater scarring?

I hope this is useful to the Committee, and please do let me know if we can follow-up on any further specific questions for this inquiry.

Yours sincerely,

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

Office for National Statistics written evidence: An Equal Recovery, July 2021

Summary

Overall, the COVID-19 pandemic has affected the economy in a variety of ways, which has translated into differing effects on the population. The Office for National Statistics (ONS) has reacted to user demand and published analysis throughout the pandemic which illustrates that:

Throughout the pandemic, those at the lower end of the income distribution were more likely to have felt negative financial impacts.
Households of younger people were less likely to be able to sustain levels of spending and the 18 to 24 years age-group had the highest proportion of those who spend more than their income.
This translated into significant differences between the financial effects on young and older people during the pandemic: older people (60 and over) were significantly more likely to say they expected the financial situation of their household to stay the same during the next 12 months from April/May 2020.
In addition, in the labour market, young people’s (16-24) employment rate saw a very large decline in 2020 compared with 2019 and relative to other age groups.
The pandemic negatively impacted the wellbeing of disabled people, with some financial impacts worse as well.
Women and men had different experiences of the pandemic too, though there were differences between the formal labour market and wider household activities. While the employment rate for men fell more than for women, women continued to deliver the most childcare, and were more likely to report worse personal well-being impacts.
Early on in the pandemic we published analysis that showed that over a quarter (27%) of Black, African, Caribbean or Black British ethnic groups reported finding it difficult to get by financially, significantly more than any other ethnic group.
Using quarterly regional GDP, we saw London and the East of England impacted more than other regions and nations due in part to their reliance on services industries in Quarter 2 and 3 of 2020 (the latest data available).
The travel and tourism and hospitality sectors were especially affected by the pandemic, and we published specific analysis looking at various linked impacts.

The following evidence submission picks up on these points in greater detail.

Moreover, as highlighted throughout this submission, the ONS are using new surveys and administrative data to provide the best evidence to understand the impact of COVID-19 on the economy and society, and to track the UK’s recovery from the pandemic. We continue to work to address the gaps in the data that remain whilst improving the granularity and timeliness of analysis we produce. We are working across Government to do so, including bringing together administrative data using the Integrated Data System as a key enabler. We will also look to seek funding to improve our survey portfolio where appropriate.

What are recent trends in income and wealth inequality in the face of the pandemic?

Early in the COVID-19 pandemic, the Office for National Statistics (ONS) set up the Opinions and Lifestyle Survey (OPN), which was created to understand the impact of the pandemic on society. This complemented our regular statistics bringing together personal (subjective) and economic well-being. The latest data was published on May 2021.

These statistics illustrates that throughout the pandemic those at the lower end of the income distribution were more likely to have felt a loss of income than those at the top end of the income distribution, as well as other negative financial impacts, such as being more likely to need to use savings to cover living costs, not being able to save for the year ahead, and having to borrow money due to COVID-19.

Using Quarterly Labour Force Survey and Longitudinal Labour Force Survey data with a focus on 2020 and up to March 2021 we can also see the impact on young people (those aged 16-24 years) in the labour market has been notable when compared with other age groups.

Young people’s employment rate saw a large decline in 2020 compared with 2019, while their unemployment and economic inactivity rates increased. After an initial fall in young people in full-time education in the first few months of the pandemic, the proportion of young people in full-time education increased in the second half of 2020, reaching a new high of 47.2% in Quarter 3 (July to Sept) 2020 and remaining high since, with the challenging labour market likely to be a contributing factor.

The number of young people employed in the accommodation and food services industry who moved to unemployment or economic inactivity increased by more than 50% in Quarter 2 (April to June) 2020 compared with Quarter 2 2019. Young people who worked part-time moved from employment to economic inactivity at a faster rate than they moved to unemployment in 2020, so in short, more likely to stop looking for work. Moreover, their labour mobility (job-to-job moves) also declined more during the pandemic than for older age groups.

What are the trends in intergenerational inequality, and how has the crisis affected them?

We looked at the social impacts of coronavirus on younger people (aged 16 to 29) and older people (aged 60 and over) at the start of the pandemic (3 April to 10 May 2020). While young people were mainly worried about the impact of coronavirus on their education, work and household finances, among older people, their main concerns were around being unable to make plans in general and personal travel plans such as holidays.

A significantly higher proportion of young people (30%) reported that the coronavirus was affecting their household finances, than older people (13%), with 84% of young people who had reported this, saying they had experienced a reduction in income and 38% saying they were unable to save. The proportion of 16 to 29-year-olds reporting these impacts were significantly higher than for those aged 60 years and over. Older people were also significantly more likely to say that they expected the financial situation of their household to stay the same over the next 12 months than younger people; 56% of those aged 60 years and over expressed this compared with only 40% of those aged 16 to 29.

As may be expected when comparing with older people, many of whom are retired, younger people were also significantly more likely to report that the pandemic had affected their work, with 21% of those aged 16 to 29 who reported this saying they had experienced a reduction in hours worked. Data from other sources for the period leading up to the pandemic also showed that young people were the most likely to report their working arrangement as a zero-hours contract.

How has the economic impact of the crisis affected disability, gender, and race inequality?

Disability

Before the pandemic, between April 2018 to March 2020, younger people and those who were unemployed, or sick and disabled, were more likely to report that they (a) would not be able to make ends meet for one week without their main source of income, (b) regularly run out of money before the end of the week/month and (c) would not be able to find money to cover a large, unexpected expense.

During the pandemic, disabled people have been more likely to report worse personal well-being impacts, such as being stressed or anxious, worsening mental health, and feeling worried about the future. They have been less able to work from home, and while they were as likely to report having reduced household income than those without a disability, their financial impacts have been worse in some respects, such as being more likely to report borrowing money due to COVID-19, using savings to cover living costs and not being able to save for the year ahead.

In the first quarter of the pandemic, employment rates of people with disabilities fell a little more sharply than for those without disabilities, with a more pronounced increase in economic inactivity, however they have also recovered more since those early days.

Gender

We published a release looking at the different effects of the pandemic on men and women in the UK from March 2020 to February 2021. For example, women were more slightly likely than men to be furloughed: 2.91m to 2.72m for men on 1 July 2020. Over time, the difference decreased, with preliminary data suggesting that on 31 December 1.88m women and 1.85m men were furloughed.

In the labour market, the employment rate for men aged 16 to 64 fell 2.7 percentage points between the three months ending February 2020 and its lowest point during the pandemic, but has recovered slightly to 2.4 percentage points below by the three months ending May 2021. Meanwhile the rate for women fell to 1.2 percentage points below its pre-pandemic level, before recovering to 1.1. percentage points below. This may be largely due to the bigger effect of the pandemic on the self-employed, which has a higher representation from men, and the lower impact on public administration, education and health during the pandemic, which have higher representation from women.

The effects of the pandemic were, however, much wider than just the formal labour market. A greater proportion of women (67%) than men (52%) home-schooled a school-age child in their home in late January and early February 2021, and a greater proportion of women reported that home schooling was affecting their well-being than men (34% compared with 20% for men) during the first lockdown (April and early May 2020). By late January and early February 2021, it was taking a greater toll on both women (53%) and men (45%).

We also looked specifically at parenting in lockdown and the effects of this on work life balance, which illustrates a gendered impact. In the first lockdown, men took on a larger share of the childcare than previously, but women were still delivering an average of 3 hours and 18 minutes of childcare, which includes time spent supervising children, while men contributed 2 hours.

The shares were more evenly split between men and women for developmental childcare such as reading to children or helping them with their homework and home-schooling. However, women picked up a much larger share of ‘non-developmental’ time, such as washing, feeding and dressing children and supervision of children. This is reflected particularly for parents of children under 5, where we see the biggest difference in time spent on childcare with women spending 4 hours 25 minutes on average while men spent 2 hours 29 minutes on it on average per day.

Overall, women have been more likely to report worse personal well-being impacts such as being stressed or anxious, the pandemic making their mental health worse, and feeling worried about the future. Women’s financial impacts have been worse in some respects, such as being more likely to report borrowing money due to COVID-19, using savings to cover living costs and not being able to save for the year ahead. While men were slightly more likely to say they were not able to save as usual, women were as likely to report having reduced household income as men.

Ethnicity

We used the UK Household Longitudinal Study to look at the impacts of coronavirus on different ethnic groups in the early part (April 2020) of the pandemic, finding that over a quarter (27%) of those from Black, African, Caribbean or Black British ethnic groups reported finding it very or quite difficult to get by financially, significantly more than those from White Irish (6%), Other White (7%), Indian (8%) and Pakistani or Bangladeshi (13%) ethnic groups. A quarter of people (25%) from Black, African, Caribbean or Black British ethnic groups reported being behind on bills and 22% reported being less able to keep up with housing payments, with significantly higher proportions reporting struggling in these ways than respondents in other ethnic groups.

Looking at the labour market by ethnic group, the picture is not clear, with groups performing better or worse than others on different metrics.

How has the crisis impacted on regional inequality?

The latest release of quarterly regional GDP is for Quarter 3 (July to Sep) 2020 and is compiled mainly from administrative data sources, principally HMRC’s VAT turnover data. Lags in the data arising from the reporting requirements on businesses means the timeliness of our regional GDP is two quarters behind the first estimate of GDP.

To give context, in Quarter 2 2020, out of the 9 English regions and Wales, the East of England saw the largest fall (-21.1%) and Wales saw the smallest fall (-15.2%). Of the 9 English regions London saw the smallest fall (-17.2%) but provided the largest contribution to the UK fall.

In the East of England, for Quarter 2 2020, the services industries provided the largest contribution to the fall (–18.1%). Within this main sector, we can break this down by the wholesale and retail (-19.8%), accommodation and food services (-75.7%) and education (-30.4%). In addition, manufacturing (-27%) and construction (-42.7%) fell. By Quarter 3, all these industries bounced back from the fall apart from manufacturing (23.6%) and education (20.3%). Four of the 14 services industries recovered the growth lost in Q2 2020.

In Wales, for Quarter 2 2020, the largest falls were seen in manufacturing (-15.2%), accommodation (-76.3%), wholesale and retail (-17.8%) and construction (-32.7%). By Quarter 3, all these industries bounced back from the fall apart from construction, with a rise of 30.9%. In London, for Quarter 2 2020, total services fell by 16%, with the largest contribution to the fall from accommodation and food services (-75.8%), administrative support services (-31%) and transport and storage (-38.1%).

Figure 1 shows GDP growth for the UK and its countries from Quarter 3 (July to Sept) 2018 to Quarter 3 (July to Sept) 2020.

Figure 1: All four countries in the UK had positive growth for Quarter 3 (July to Sept) 2020

Seasonally adjusted quarter on quarter GDP growth for the UK and its countries, Quarter 3 (July to Sept) 2018 to Quarter 3 (July to Sept) 2020

In Quarter 3 2020, the services industry has not fully rebounded, with a rise of 11.7% and only six of the 14 sub-industries recovering from their fall in growth in Quarter 2 2020. The transport and storage; arts, entertainment and recreation, and administrative and support service activities and education show the weakest recovery in growth following their decline in Quarter 2 2020. London experienced the largest fall in financial services out of all UK regions in Quarter 2 2020, with a fall of 8.8% although rebounded a little with growth of 3.2% in Quarter 3 2020.

In Quarter 3 2020, only three of the English regions recovered the growth lost in Quarter 2 2020: Yorkshire & Humber, East Midlands and the South West. For all three regions, accommodation and food services provided the largest contribution to the growth along with wholesale and retail, manufacturing and construction.

The regions that saw the smallest recovery in Quarter 3 2020 were London (13.3%) and West Midlands (16.8%). In the West Midlands for Quarter 3 2020, manufacturing has not recovered from the fall in Quarter 2, and only four of the fourteen services industries have recovered in growth. Figure 2 shows quarter on quarter growth for the regions of England and countries of the UK for Quarter 2 (Apr to June) 2020 and Quarter 3 (July to Sept) 2020.

Figure 2: The region with the largest positive GDP growth in Quarter 3 (July to Sept) 2020 was the South West which increased by 19.9%

Seasonally adjusted quarter on quarter GDP growth for the regions of England and countries of the UK for Quarter 2 (Apr to June) 2020 and Quarter 3 (July to Sept) 2020

Are certain regions or sectors likely to recover more slowly or have longer term economic damage and greater scarring?

Another survey set up at the beginning of the pandemic was the Business Insights and Conditions Survey (BICS), which helps us understand business impacts at the national and sub-national level on the UK economy. Using microdata from this survey we can understand the business impacts of local and national restrictions.

For example, we can see that multi-site businesses (tend to be larger companies) have a consistently higher proportion of businesses currently trading than single-site businesses (smaller companies) from November 2020 to July 2021, though the gap is narrowing. Meanwhile, the percentage of businesses experiencing a decrease in turnover is similar for both single-site and multi-site businesses with both seeing a steady improvement over time.

Wales had the highest percentage of single-site businesses currently trading in early July 2021, at 98%. And Scotland has consistently had the highest proportion of its workforce on furlough leave since early November 2020, but is now at similar level to both England and Wales.

Based on information from HM Revenue and Customs Real Time Information on the number of payroll employees, in June 2021 four regions were above pre-pandemic levels: North East, North West, East Midlands and Northern Ireland. Most other regions were within around 1% of pre-pandemic levels. The exception was London, which fell by a higher percentage than other regions and still had over 3% fewer payroll employees in June than pre-pandemic.

We have also looked at particular sectors that have been heavily impacted by the pandemic, such as hospitality (published July 2021) and travel and tourism (published February 2021). For example, these highlighted the uneven impact on hospitality, and lack of confidence in business survival compared to the all sector level. Job vacancies in the hospitality sector have seen large increases and are higher than pre-pandemic levels; however, in June 2021, the number of employees within the sector remained 11% below February 2020 levels.

For travel and tourism, the impact was immediate: monthly air passenger arrivals to the UK fell from 6,804,900 in February 2020 to 112,300 in April 2020, a fall of 98.3%. It had a regional impact, as Greater London saw the largest fall in room occupancy of any English region from 2019 to 2020, with just 20% of rooms occupied in July 2020 compared with 90% in the same month in 2019. In the three months to June 2020, employment in accommodation for visitors fell by 21.5% compared with the same three months of 2019.

Accommodation and travel agency businesses saw the sharpest decline in turnover during the first national lockdown, falling to 9.3% of their February levels in May 2020. In travel and tourism industries overall, the number of people aged 16 to 24 years saw the largest fall in employment of any age group between Quarter 3 (July to Sept) 2019 and Quarter 3 2020.

Office for National Statistics
July 2021