Committee

• Martin Weale (Chair)
• Robert Heath (Deputy Chair)
• David Caplan
• Paul Mizen
• Rebecca Riley
• Mairi Spowage
• Nick Vaughan

ONS

• Kate Beeslee
• Ed Bailey
• Rob Doody
• Paul Dunstan
• Adam Dutton
• Chris Jenkins
• Riikka Korhonen
• Rosie Maslin
• Craig McLaren
• Helen Meaker
• Katherine Mills
• Sophie Peabody
• Simon Rigby
• Sara Zella

Apologies

No apologies were received.

1. Welcome and apologies

1. The Chair welcomed committee members to the fourth National Statisticians Committee for Advice on Standards for Economic Statistics (NSCASE) meeting. No apologies were received. Members were asked for their permission to record the meeting.

2. Approval of minutes from previous meeting and Declarations of Interest

1. Committee members approved the minutes, and no interests were declared.

3. Overview and status of actions from last committee meeting

1. A document outlining actions to be taken was submitted to the Committee. The Chair invited the members to flag any concerns or questions.
2. Robert Heath asked when he would receive a response to his questions on the Public and Private Partnerships (PPP) paper that was presented at the last meeting. Robert questioned whether the Prices and Volume paper had been updated and re-circulated. Rebecca noted that it was redrafted, and it was circulated with the minutes, which took on board their comments. However, Robert and Rebecca raised that they would have liked to have been specifically notified of the changes.
3. The Committee agreed that going forward, any revisions to papers should be made obvious with track changes when circulated to Committee members before publication.
4. Robert Heath added that a discussion on international guidance should be added to the action document as it had been proposed in January. The Committee agreed that this issue should be discussed at the July meeting.

Actions:

NSCASE Research Team and Secretariat to track change documents with revisions and make a table of documents where changes have been made before publication.

Secretariat to prepare item to discuss international guidance at next NSCASE meeting and add to the action log.

ONS to respond to questions on the PPP paper to be published with the minutes.

4. Approaches to the Committee

1. The Chair reminded the Committee of the approach from Ed Humpherson. He added that he and Ed had spoken after Ed wrote to him. Ed distinguished between OSR and ONS’s role with the Committee noting that the Office for Statistics Regulation (OSR) would ensure the committee are meeting the expected outcomes and that the Committee would continue to identify the guidance most appropriate for the UK.
2. The Committee agreed that this was a good resolution but asked whether it appropriately aligned with the Terms of Reference (ToR). The Committee looked at the ToR in the meeting and agreed they appropriately reflected the distinction.
3. The Chair further updated the Committee that Ed had submitted some notes on updates to their work including developing proposals to replace the external audit role of economic statistics. This role was previously performed by Eurostat. OSR was carrying out an audit of the producer price indices. OSR would be happy to discuss the assessment at the next NSCASE meeting, both in terms of its findings and what lessons can be drawn from it as a pilot exercise.
4. The Committee welcomed a presentation by OSR at the next meeting.

Action:

Secretariat to liaise with Ed Humpherson to present at the July or October meeting.

5. Introduction to Updates to the Manual on Government Deficit and Debt (MGDD), 2022 Edition

1. Helen Meaker presented on the updates to the Manual on Government Deficit and Debt (MGDD), 2022 Edition. Helen provided a history of MGDD and noted that there have been 17 topic area changes which have been more extensive than the updates that were made in the period of 2016 to 2019. Helen noted that the implications for the UK of all the updates was not fully known and proposed that the ONS review first the low-complex topics and then the more complex issues and that all these topic areas be addressed in more detail at the NSCASE meeting in July. She welcomed support from the Committee on the proposed approach with the goal of reaching a point where the Committee will be able to endorse the updates.
2. Robert Heath supported the proposal but asked whether the intent was for NSCASE to sign off the updates in stages or as one package. Helen explained that she would like to provide a package on each of the different changes in a succinct way. A more fragmented approach could make implementation more complicated. Helen noted that she hoped she would be able to look at the guidance in more detail and as such, believed it might be possible to present it all at the July meeting.
3. Robert Heath asked what the paper meant by ‘complexity’. Helen noted that it was difficult to get the terminology right to highlight prioritisation and time required to look at issues. She added that low complexity would mean that issues should be relatively easy to address, and high complexity would require more expertise and time.
4. Robert further asked that the relevance of the UK’s situation, consistency with international guidance, and the potential impact on UK fiscal studies be covered in the review. Helen reassured Robert that the paper would cover those points and is going to look at what the UK has put in place to follow the international standards, comparing with the MGDD 2022 updates.
5. Mairi Spowage asked, in setting out the full adoption of changes, whether they would be adopted in a phased way. Mairi added that as well as a review, some idea of phasing would be useful. Mairi also added that it would be beneficial to hear from NSIs if they have experienced issues and what adopting certain changes might mean for the ONS, which would in turn, help to guide the ONS timetable. Nick Vaughan highlighted that the UK has not been able to attend Eurostat meetings, which means the UK doesn’t have the advantage of knowing what others may have spotted. Helen agreed and would investigate whether ONS could find practical issues that other countries have experienced.
6. The Chair noted that, if only some of the recommendations were implemented or implementation was gradual, then there was a risk of inconsistencies between different parts of the accounts. He added that is something the ONS should be aware of and asked whether the ONS could offer a view on that.
7. Nick asked whether the recommendations reflect the Treasury view since they are a joint producer of public finance statistics. Helen confirmed that they did. He recalled that there were some issues around student loans and asked if the presented version of the MGDD consolidated the UK’s views on loans. Especially since there could be common aspects with other loans, e.g. provided through Covid-19 that were not expected to be repaid in full. Helen noted that she was aware that MGDD was aiming to record loan components and transfer components. She added that she would need to look at some of the changes in more detail.
8. Nick asked if there was any aspect of MGDD that looked at regional finances. Helen confirmed that there weren’t any changes in the MGDD which reflected that but that there was interest from devolved governments. Nick asked how this applies to the Bank of England as counterparty to transactions with general government. Helen will investigate and go back to Nick with more detail.
9. Robert Heath questioned whether the MGDD covered only general government or the public sector and whether it covered pension liabilities of government employees in its debt and deficit figures. He thought that European System of Accounts (ESA) didn’t cover pension liabilities of government employees, but that the IMF’s Government Finance Statistics Manual (GFSM) did. Secondly, he asked whether the UK was going to continue to publish Maastricht debt figures or would it go to the broader measure on the global standards. He raised that as the UK was now signed up to Special Data Dissemination Plus (SDDS+) which adheres to the broader measure, the UK should perhaps do both. Helen noted that both were being produced now, and there were no plans to alter the range of available data.
10. The Chair brought the conversation back to the points the Committee had made on MGDD being about general government and not public sector. He pointed out that there was a Treasury indemnity to the Bank of England associated with asset purchases, which he stated would need to be reflected as a contingent liability of government in some way. He highlighted that if the whole public sector was consolidated the Bank of England would net out. Katherine Mills noted that she was unable to comment on the Chair’s point directly but would address it in the July paper, so the committee were aware of how interactions with the Bank of England were reported. Robert added that he would be glad to see both contingent liabilities and the role of the Bank and HMT covered in the July paper. The Chair agreed that understanding how the guidelines worked in that context would be helpful.
11. The Chair asked that if the full proposal is being brought to the Committee in July, would the committee want to defer a decision until more material has been seen. Nick asked whether there was there a distinction between full, partial, and incremental adoption. Helen confirmed that some of the recommendations would be supporting what the UK already has in place, adding that every time there are guidance changes, there may be some fiscal impact.
12. The Committee agreed that ONS would bring forward analysis of key issues within MGDD such as pensions, loans not expected to be repaid in full cf. student and Covid loans and treatment of transactions between the central bank (BoE) and general government. ONS would review MGDD and bring forward issues to NSCASE.

Actions:

Katherine Mills and Helen Meaker to address the MGDD update in more detail at the next NSCASE meeting, including on how guidance provided in MGDD for the general government sector influences statistics pertaining to the broader public sector scope, for example the treatment of interactions with the Bank of England, and the treatment of pensions.

Helen to contact NSIs for advice on experience with the adoption of MGDD 2022. International team and secretariat to support.

Helen and Katherine to offer view on risk of inconsistencies

Secretariat to keep Chair and Committee informed ahead of July meeting on what will be coming to the committee regarding MGDD.

6. Update on recent developments in the System of National Accounts

1. Craig McLaren provided the committee with an update of recent developments in the System of National accounts (SNA). This covered the SNA 2025 consultations, the United Nations Statistical Commission, recent Advisory Expert Group (AEG) meetings, an international workshop on Crypto, and the latest updates on Crypto Assets. There has also been lots of work in the international community separately from this.
2. There was discussion and focus over a reported comment from Finland at the 54th UNSC meeting which read “National Accounts and GDP need to be consistently understandable for policy makers; core accounts should be limited to issues that can be measured in monetary terms.” Questions were raised over whether they are proposing to take imputed rent out of GDP. The Committee would value knowing whether there are implications from Finland’s intervention at the UNSC. Craig would follow up on how ONS could engage with Finland.
3. The Committee noted that it would be beneficial for the ONS to provide them with a list of issues that the UK deemed as the most important. Rebecca added that it would also be useful to receive information on the process by which the UK was influencing international standards and the criteria used. Issues should be identified where the Committee’s influence might make a difference.
4. Robert Heath asked whether a timetable of key decisions going to the AEG and UNSC could be provided. The Secretariat offered to get in touch with the SNA Secretariat to request a timeline. It was flagged that where issues of the AEG are concerned, the current UK AEG member should be invited to meetings to respond to questions. The secretariat agreed to work with the representative to receive regular AEG updates where appropriate.
5. Paul Mizen asked whether more information could be given on Crypto Assets without Liability (CAWLM) as a non-produced asset and the use of it as a financial asset. Robert Heath referenced the Crypto workshop which was hosted by ONS where a wide range of people attended. In his presentation at the workshop, Robert had proposed that CAWLM be classified in the capital account as a financial valuable – a financial instrument but not a financial asset. Subsequently, the AEG had decided that CAWLM be classified in the capital account as a non-produced asset. The reasoning behind this decision was not known at this time, but Robert speculated that the non-produced element might be to ensure that the current account is unaffected, as at the workshop, Brazil showed how CAWLM classified as a produced non-financial asset was affecting their current account. While there were polarised views at the AEG, the outcome was not entirely inconsistent with the idea of a financial valuables account that from a UK perspective could include non-monetary gold.

Actions:

Craig to seek clarification from the UK representative as to the context of the reported remarks.

Secretariat to contact SNA secretariat and work with UK AEG representative for regular updates.

7. NSCASE Introduction to Natural Capital Depletion and Consultation on SNA Guidance Note WS.6

1. Adam Dutton provided an overview on Natural Capital Depletion and Consultation on SNA Guidance Note WS.6. The main recommendations of the paper were regarding the split asset approach where the de-facto owner didn’t gain the full value of the asset. It also recommends that the depletion of that asset should be listed as the cost of production; and the paper suggests including non-cultivated biological assets which would include the Amazon and fisheries for example. The ONS is broadly keen to reflect better the environment in national statistics but has been considering each recommendation on its own merits. The ONS sought to begin to inform the Committee that a number of potentially significant changes may arrive in SNA 2025, seek their thoughts and ensure they understand the potential ramifications at least to the degree that we do.
2. Robert Heath supported the idea of natural resource use being a cost of production and suggested looking to further integrate the SNA and System of Environmental Economic Accounting (SEEA). Robert interpreted the outcome differently from Adam noting that he was unaware of a change in terms of coverage of natural resources apart from more precise guidance on mineral and energy resources – the asset boundary still appeared to be based on the concept of ownership. However, there were many supplementary papers to the AEG Guidance note so he would welcome ONS clarification on whether more natural resources are to be covered in SNA 2025 than SNA 2008 beyond the more precise guidance on minerals and energy resources.
3. Mairi Spowage asked if this meant the UK weren’t fully complying with the SNA. She questioned whether it would be possible for the ONS to implement the full definition outlined in the SNA. Adam noted that ONS have a lot of the data and methods necessary should these changes occur but that more resource and work would be required.
4. Robert Heath questioned whether natural depletion would extend to soil degradation. Adam added that the ONS would struggle to measure it since there are no national estimates of soil depletion and ONS would need to measure statistically its contribution to agricultural production. However, Adam suggested that the approach adopted for measuring the economic benefit of pollination could be adapted to measure soil degradation. Robert was interested to know whether the SNA would capture the use of wild forest without ownership; sand taken from beaches; and fishing outside of international quotas, as a cost of production.
5. Paul Mizen asked how these principles might apply to renewable energy might apply to resources that have no obvious owner, e.g. wild fish, renewable power. SNA 2008 and SNA 2025 seem to apply best to natural things that have an owner, e.g. ore in a mine, but not to things that have no owner, e.g. renewables. Adam’s interpretation was that renewable energy guidance is being provided in another paper. The supplementary reading in papers 8 (SNA WS.8 Guidance Note: Biological Resources), 10 (SNA WS.10 Guidance Note: Mineral and Energy Resources) and 11 (SNA WS.11 Guidance Note: Renewable Energy Resources), provided discussion of biological assets, minerals, and renewables. The resource rent approach using national accounts figures for renewables didn’t capture the value of the weather.
6. Non-market prices tend to be less volatile. In terms of biodiversity, a lot of it isn’t valued as most of it is considered as a proportion of the overall value of other services such as agricultural biomass and recreation. For example, benefits from pollinators would be captured within food prices. That was unlikely to go into SNA. In SEEA it was termed in a different way, meaning that you could look at what the UK spend on biodiversity protection, but the papers weren’t pushing that far.
7. Mairi Spowage recognised biodiversity was difficult to measure. On the topic of fish quotas, she asked whether too much has been taken and was unsure why there was a divergence from the normal estimates. Adam added that complexity exists around using models to measure overfishing as they are not built to do so. He was concerned that if they used those models, it would be logistically difficult to measure things in house, but it might be possible to simplify and standardise them.
8. Nick Vaughan asked whether we were hoping to build influence by being ahead of other countries in implementing these changes. He further inquired whether there was going to be a new SEEA as the current version was from 2012. Adam clarified that there have been more recent updates that are no longer experimental, and which are being implemented into the SNA. The UK will then have to decide whether the changes to the SNA were followed further down the road.
9. The Chair asked how the Kuwait problem was going to be resolved. Kuwait extracts oil and sells it to other countries. If that is all it does its NDP is zero despite its great oil wealth. He suggested that the costs of depletion should be allocated to users rather than producers of natural resources.  If oil rights were sold to consuming countries and the proceeds then invested in produced capital, the country selling the rights would still have zero NPD but would have a positive NNI. Ideally the SNA should be neutral between these two possibilities. The Chair would circulate a short note on the issue.
10. Robert Heath asked whether the international discussion had been finalised and whether the UK – in his view, a world leader in this field – could still influence the international debate. Robert added that it was likely work on the natural world would generate a lot of user interest and, given this, suggested that there might be international initiatives further down the line to actively promote implementation of the new standards. Adam noted the ONS were doing a range of work to look at the issues more broadly.
11. The Chair raised the point that if the asset boundary was not changed then some of the most important issues, such as global warming wouldn’t feature in the National Accounts. Nick Vaughan supported The Chair’s comment and agreed that while the Committee could advise on guidance, it was problematic if the guidance did not address the larger issues.
12. Adam added that the beginning of the paper outlined that the long-term aim is to bring a series of papers outlining proposed changes to be introduced in SNA25 and what challenges the UK may expect to come up.
13. The Committee welcomed further papers and expressed their appreciation to Adam for facilitating an informative discussion.

Actions:

Chair to circulate paper on the Kuwait problem.

ONS to provide further updates as the SNA work progresses, including addressing issues raised in the discussion.

Adam to send written response to the committee’s question around asset boundary and what will be included in the next SNA.

8. Quality adjustment of public services

1. Sara Zella provided an overview of quality adjustment of public services. The goal of the paper was to propose introducing the effects of quality change in the volume measures of public sector output shown in the National Accounts, making the UK consistent with SNA 2008 which advocates such adjustment. ESA2010, on the other hand prohibits them. Sara provided a history of the international guidance and noted that ONS are already applying quality adjustment to public service productivity estimates but were not including these adjusted measures in the National Accounts. The Committee were asked to support introducing existing quality adjustments already derived by the ONS into the national accounts.
2. David Caplan strongly supported the paper. He added that including quality is of high importance and referred to a report by Tony Atkinson which used exam results as a measure of quality education.
3. Mairi Spowage also strongly supported the idea. Mairi highlighted that the data didn’t always cover the whole of the UK. She recognised that this is often because of ‘messy’ data but argued that coverage needed to be improved. Mairi supported the inclusion of Non-Profit Institutions Serving Households (NPISH). She also supported the adjustments proposed. Sara Zella agreed with Mairi’s comments and added that the ONS were working mostly with English data because of its availability. ONS was having more discussions with devolved nations. Sara noted that the UK was one of a few countries who are considering the introduction of quality adjustment. Sara was keen to continue the discussion at the international level.
4. Robert Heath outlined the distinction between principle and detail. He agreed with the principle but wanted more detail in order to provide a decision.
5. Rebecca Riley supported the proposal and added that an assessment of quality should be undertaken. There is a lot of activity to improve this in NPISH and the public sector. Rebecca noticed in the paper that ESA has been a constraint and questioned whether any other countries made quality adjustments to public sector output measures. Concern was raised over the UK becoming an outlier. If that was the case, a user consultation should be undertaken before any changes were made. Nick Vaughan supported this proposal and flagged potential complications should the relevant part of the 2008 SNA be changed in the 2025 SNA.
6. Paul Mizen questioned what the benefits were of being the leader in this area. He asked how many other countries do this, and whether the UK is an international leader or an outlier.
7. The Chair raised concern that the best might be the enemy of the good. The criteria should be analysed further in the context of NSCASE’s decision framework. There might be a conflict between economic logic and international comparability. NSCASE might need to make a decision on which was more important. The Chair supported the proposal that adjustments should be extended to NPISH.
8. The timeline was discussed by the committee. Mairi added that 2026, proposed by the ONS, provided reasonable time, and believed it would be an improvement to the accounts even if it were not perfect. Nick asked for caution to be taken if the UK would lead but supported the change as long as the proposal was carefully considered. Rob Doody (ONS) added that 2026 provided ONS with sufficient time allowing methods to be carefully considered. He added that if NSCASE made a decision in principle, the ONS would be able to work on methods and improvements.
9. Robert inquired into available resources to support the work, but the Chair added that the proposal was to introduce existing work and understood that a change could be made relatively quickly.
10. Nick asked if quality adjustments in public education could also be applied to the private sector so as to avoid a situation where one was quality adjusted and the other wasn’t. He also asked about consistency between output and expenditure. Rob Doody flagged that non-market output was the same as non-market expenditure and that the change applied only to volume measures.
11. Robert Heath noted expressed interest in quality measure of health output. Sara responded that the quality adjustment of health is some of the most developed data that ONS have, with some of the data provided by the University of York. The ONS were aiming to get more of this data in advance. Robert Heath asked whether that work focused more on the outputs of hospitals than other areas. Rob Doody agreed that it did.
12. David Caplan recognised that the proposal would require a lot of work, leading to outputs which at times could be controversial. He referred to previous work that had been scrutinised by Parliament. He recommended a degree of external scrutiny going beyond general consultation.
13. The Chair asked the Committee to agree that existing quality adjustments should in principle be introduced into the accounts. The Committee agreed but asked (1) to be reassured that a high level of scrutiny would be applied to the work; (2) that the appropriate stakeholders would be consulted; (3) any reputational risks be carefully assessed; and (4) to receive feedback in 12 months. The Committee believed that the work was on an important and material issue and welcomed the fact that ONS could make the proposed change.

Actions:

Sara to feedback to Committee in 12 months.

ONS to consult external stakeholders on the implementation of quality adjustment of public services.

Sara to analyse the criteria further in the context of NSCASE’s decision framework and ensure that a high level of scrutiny is applied to the work.

9. Update to forward work plan

1. The Chair updated the Committee that the forward workplan had been amended and invited the Committee to accept the new workplan.
2. The Committee were generally happy, but a few concerns were raised. Robert Heath noted that an AEG Guidance Note on marketing assets is to be revised, so he questioned whether including this item on the July agenda may be premature. The secretariat agreed to hold a meeting with the Chair on this issue.
3. Robert suggested that when the committee reviews the updated paper on non-monetary gold, in which CAWLM is also to be covered, as the two tend to go together. The Chair agreed that it would be good to have Richard present his views on this.
4. It was agreed to add to the workplan in July a holistic discussion on the principles to be applied in determining which international guidance (global/European) to follow.
5. The Committee requested that the papers should show paragraph and page numbers and should be in the format that the Committee had previously specified. Any amendments in the light of previous discussion should also be shown.

Action:

Secretariat to ensure that the papers submitted to the Committee should be formatted with paragraph and page numbers.

10. NSCASE Recruitment

1. The Chair updated the Committee that the Secretariat were looking to recruit two new members. The Chair raised his concerns over specifically recruiting an environmental specialist, which the Committee echoed.
2. The Chair welcomed comments on the advertisement. Robert Heath stressed that on the paragraph starting ‘economic indicators’, language such as supporting the adoption and implementation of high-quality standards for UK statistics and influencing international statistical standards should be added. He further suggested changing the desirable criteria to “experience at the interface of environmental and economic statistics”.
3. Nick Vaughan raised that official economic statistics should be worded as the most important.
4. The Chair suggested appointing Philip Wales as an observer. The Committee supported the proposal. An additional suggestion was made to invite specific observers with relevant expertise on an ad hoc basis.

Actions:

Secretariat to edit the advertisement and remove the July meeting date.

Secretariat to reach out to Philip Wales.

11. Any Other Business

1. The Chair requested the status of the Annual Report and requested that the next January and April meeting invitations were sent.
2. Mairi asked if the October meeting could be moved a week later or earlier, given the timing of half term in Scotland.

Actions:

Secretariat to follow up on Annual Report.

Secretariat to send poll for availability in October.