Committee

• Martin Weale
• David Caplan
• Robert Heath
• Paul Mizen
• Rebecca Riley
• Nick Vaughan (virtual)
• Ian McCafferty

ONS attendees

• Cliodhna Taylor
• Chris Davies (virtual)
• Alex Evans (virtual)
• Richard McCrae (virtual) (for item 3)
• Kirsten Newton (virtual)
• James Tucker
• Richard Heys (virtual)
• Roger Smith (virtual)
• Mark Stephens (virtual)

Other attendees

• Pat O’Connor (Bank of England) (virtual)

Secretariat

• Jonny Mudge
• Kate Beeslee

1. Approval of minutes from previous meeting and declarations of interest

1. The Chair welcomed the Committee. He asked members for comments and/or suggestions on the minutes of the previous meeting. There were no comments.
2. The Chair informed members that Thomas Viegas had resigned from the Committee given other work commitments. The Chair and Committee thanked him for his contribution.

2. Overview and status of actions from last Committee meeting

1. No formal recommendations were made to the National Statistician at the January meeting, but the Chair noted that all previous recommendations had been accepted.
2. The Chair went through the action log. He noted that the pending SNA implementation item would fit round the revised NSCASE meeting timetable. He noted that the UN were establishing an expert group on well-being and asked how this would interact with NSCASE. Cliodhna Taylor explained that Richard Heys sits on the Bureau which the working group will sit under. The ONS was pushing for a high level of user engagement but she was unsure whether the working group would enlist independent experts, noting that the group was in its infancy. The Chair emphasised that members of NSCASE could offer their expertise to this high priority topic.
3. The Chair thanked Robert Heath for circulating his paper on emissions permits. Robert noted that he looked forward to further discussion in the balance sheet chapter.
4. The action to provide more worked examples for globalisation remained outstanding.
5. The Committee reviewed the deviation log. David Caplan asked that on the use of Consumer Price Index (CPI), deflation and measures, that the deviation log captured that the decision should be at National Statistical Institutes’ (NSI) discretion. The Committee agreed that the ONS is best placed to decide on the appropriate price measure for deflation for the UK context. They agreed to offer this as a possible deviation from the SNA to the National Statistician.
6. The Committee requested that more detail be given on the question of an imputed return to non-market assets to reflect the potential impact of this on GDP.
7. Members asked how NSCASE’s advice would feed into ONS’ implementation plan. Cliodhna stated that the deviation table provided a simplified look at the Committee’s suggestions to deviate, with the comprehensive discussion being captured and published in the minutes. The full minutes would be consulted when planning, but the table provided a one-stop-shop of the key areas. She added that the ONS would use the minutes of NSCASE meetings alongside the SNA itself in its Methodology advisory Committee when considering national accounts changes where NSCASE advises deviations away from the SNA.
8. Robert asked for clarification on the timescale. Cliodhna noted that 2030 was the target for implementation, subject to the spending review. She added that some areas were closer to implementation than others, based on ongoing ONS work. The results of the spending review bid were currently not confirmed.

Action:

Secretariat to make clarifications to deviation log

3. Update: Annual update on ONS work focussing on the impact of globalisation

1. Roger Smith presented an update on the ONS’ work on globalisation, in particular on handling Factoryless Goods Producers (FGPs) in the national accounts. He asked for NCSASE’s advice on whether the ONS should base their treatment of FGPs on the global manufacturing basis as detailed in the SNA2025 and BPM7, or, as merchanting which is the current, less formal guidance that was published by the United Nations Economic Commission for Europe (UNECE) in 2015.
2. Robert noted that in the recently published Balance of Payments Annual Report, the development of compilation guidance for factoryless production is cited as a priority. He asked if the UK would be part of developing this. Mark Stephens stated that the UK were interested in being part of this and had already attended the IMF working group on FGP arrangements and presented on the ONS approach to FGPs.
3. Robert supported adopting the SNA 2025/BPM7 treatment. He asked how many UK companies were involved in factoryless production and if there was an indication of how significant it was for the UK. Mark stated that it was impossible to know for sure but that the globalisation work had identified a small amount of activity based on a few industries. He also highlighted some research done by ESCoE a few years ago which identified 450 businesses participating in global production arrangements, but it was unclear if these were FGPs or not.
4. Mark added that other European countries were taking a top down approach to researching FGPs and were looking economy wide, whereas the UK is taking a bottom up approach. He acknowledged the challenge that the work was on a small scale and that it would be challenging to transfer it up to a scaled estimate. Robert suggested working with other NSIs that have better FGP measurements. Mark highlighted that the team were working with a number of European countries but noted that the challenges differed across NSIs and that obtaining data from other government departments, was a challenge for the ONS.
5. Nick Vaughan strongly supported the recommendation to move to manufacturing and questioned if there were any advantages to remaining with merchanting.
6. The Chair acknowledged the challenge to avoid issues of double counting. Ian McCafferty suggested that Airbus would be a valuable case study for international work and treatment of intellectual property. Mark noted that the team were investigating how businesses looked at accounts, but that it was a large piece of work.
7. Roger added that the underlying challenge was that ONS core trade in goods data source were based on movements between countries, but ONS need to adjust that to reflect change in economic ownership. He noted that treating FGPs on a global manufacturing basis was much preferred by ONS for the reasons outlined in the paper. He added that, regardless of how FGPs are treated, a new comprehensive data source is required to enable accurate recording of FGP activity.
8. Rebecca Riley noted the potential impact of this recommendation on trade statistics. She asked if productivity statistics or production data would also be affected. Cliodhna stated that if these affected GVA, then the productivity figures would be impacted. The Chair agreed, and noted, that this also applied to toll processing, a business that provides manufacturing services as part of global production arrangements and that ONS would need to evaluate if some businesses needed to be reclassified. Rebecca noted that user interest could be high.
   • Recommendation: Factoryless production should be treated in line with new SNA/BPM, not as merchanting.

4. BPM7 Chapters 6 and 11

1. Chris Davies introduced the paper on BPM Chapters 6 and 11. He noted that BPM7 had an increased focus on digital aspects, ONS asked for members’ views on the appropriate methods and data sources to consider when measuring crypto activity.
2. Robert noted that the development of a handbook on crypto assets was a priority for the IMF, according to the Balance of Payments Annual Report and suggested UK involvement in that. He also acknowledged the challenge in calculating some elements of the balance of payments. He added that there was no reference to Exchange Traded Funds (ETFs) under portfolio investment, and questioned if this was something the ONS would be able to identify, or whether they planned to develop the capacity to identify them. He also asked if the ONS would be able to reconcile the balance sheet with flows between balance sheets. Richard McCrae noted that there was work going on to resolve the flows between stocks and position and that the ONS intended to have the full suite of functional categories when moving to BPM7. Robert also asked if crypto mining was relevant for the UK.
3. Ian highlighted that, in terms of gaining understanding and obtaining data, that it was an opportunity to interact with new trade associations in the crypto industry. He noted this could help to improve the measurement of crypto by resolving the challenge of the decentralised blockchain.
4. Robert noted that paragraph 11.34 said that goods and services provided free by government to non-residents, should be covered under specific services, e.g. health services. He suggested that ONS looked at the detail and decide how wide they wanted the coverage to be. Roger stated that the team were currently bringing on additional resources to look at the detail and impact of the manual. He acknowledged that the data the ONS could access would affect this, noting that they agreed with the principle but that it was unclear if the ONS would be able to deliver this.
5. Nick asked when the BPM7 would be implemented. Roger confirmed that it would be implemented in line with the broader SNA.
6. Robert acknowledged the challenge of the proposal to measure implicit services on crypto assets. Roger agreed and informed members that the ONS had flagged this for the research agenda as an area needing compilation data.
7. The Committee agreed to accept BPM chapters 6 and 11 but acknowledged the challenges in measuring some of the data.

5. Advice: Deviation from International Statistical Guidance

Chapter 14

1. Robert led the discussion on SNA Chapter 14: Balance Sheet. He flagged paragraph 14.29 on natural resources and split valuation as a concern. He referenced para 14.37 and asked how the ONS would revalue military equipment. He cited paragraphs 14.80-83 and noted that in the valuation of private equity, the book value should not be the preferred method and recommended that more focus be given to market transactions. In this regard, he drew the ONS’s attention to the recent report from the FCA on private market valuation practices, observing that according to the report, the UK was the largest centre for private asset management in Europe. He asked ONS to note this for review.
2. He noted paragraph 14.113 on concessional lending and stated he hoped ONS would be able to implement this.
3. There was a discussion on emissions permits. Robert emphasised his position that emissions permits should be classified as non-produced, non-financial assets and suggested that the ONS deviate from the SNA on this point. Cliodhna explained the ongoing work of the public sector team, stating that although the UK argued for emission permits to be classed as non-produced, non-financial, there was an extensive user consultation underway and they wished to collate user responses before presenting the results to the Committee and asking for an official recommendation. She noted that ONS was not yet in a position to make a decision on this subject. She stressed that Robert’s paper provided a strong alternative position if ONS were to deviate.
4. The Chair asked members if they believed there was enough justification to warrant deviation.
5. David agreed that the non-produced, non-financial was objectively better for the UK, but contemplated whether the position in the manual was so negative as to justify deviation. Paul Mizen said that if there was a possibility for the ONS to produce better statistics then they should strive for that. Rebecca concluded that the SNA position was not negative enough to warrant deviation.
6. Nick asked whether the ONS supported Robert’s position and questioned whether different statistics could be produced to serve different purposes. He agreed that the SNA position was not the worst-case scenario for the UK, but that Robert’s proposal would produce better statistics for the UK context. Cliodhna answered that the ONS does not yet have an official position because of competing priorities, and ongoing user discussions as part of the GFSM consultation and wished to consider these at the same time in order to fully understand any knock-on effects.
7. David agreed that the ONS should come to the Committee with a clear articulation of their position and implications across the suite of international statistics and that they did not yet have enough knowledge to make a call.
8. Robert asked that ONS continued to argue for non-produced, non-financial assets and return to the Committee when that is concluded. He noted that the classification of carbon credit offset permits was also relevant to this discussion, albeit a topic not covered in the SNA2025.

Chapter 18

1. Paul led the discussion on chapter 18.
2. Paul noted that the ONS was in alignment with the SNA on applying adjustments to quality, but that this was not aligned with the ESA manual.
3. He raised that paragraphs 18.124-133 on non-market outputs of government, central banks and NPISH sectors may have implications for productivity estimates. The guidance recommended to infer the outputs from the input. The ONS already deviated from this approach, as demonstrated in the recent outputs on public sector productivity, where the different strategy allowed the ONS to measure productivity across different sectors such as education and health. He recommended a deviation from this, noting that the ONS was already not compliant with the SNA.
4. He also noted areas where he expected there to be a measurement challenge, namely services of the central bank, as noted in paragraph 18.232, and financial services, as noted in paragraphs 18.233-237 which implicitly assumed all services are down to financial mediation and did not provide clear guidance for compilers. He also highlighted that implementation would require confidence in PPI indices when measuring immediate consumption, which may pose challenges for implementation or in the confidence of these statistics. David and Paul agreed that the Committee had discussed the unreliability of some PPI indicators in a previous meeting.
5. The Chair added that chapter 18 was vague in its guidance on the introduction of new goods and only directed compilers to the Consumer Prices Manual. He asked ONS to note that the reservation price should be used to provide a price in the period before the introduction of the new good where possible and that a chain-linked Laspeyres index would not reflect the decline from the reservation price to the actual price. A Törnqvist index was more appropriate in this case.

Chapter 21

1. Robert introduced SNA Chapter 21. He welcomed this chapter as it would provide helpful advice to compilers. Regarding changes in terminology, he considered most were appropriate, but noted a number of instances where the change in terminology was not necessary and risked confusing users. These included
   1. The change from ‘consumption of fixed capital’ to ‘depreciation’. He believed the former better described the economic activity, which had a valuation as well as volume connotation; and
   2. The change from ‘resources and users’ to ‘revenues and expenditures’ as economic activity was about resources and their use. In BPM7, Robert preferred the continued use of ‘debits and credits’ to ‘revenues and expenditures’.
2. David agreed and added that the introduction of new terms caused confusion after the 1998 SNA. The Committee supported Robert’s concerns about changes of nomenclature that were less than satisfactory. The Committee believed the ONS should have a high bar when it came to changing terminology and suggested that ONS engaged with users before making changes on this.

Chapter 22

1. The Chair reviewed chapter 22 and noted there was nothing controversial enough to warrant deviation. He expressed concern about the non-production of crypto assets but did not suggest ONS deviate and predicted there would be developments in this space as the issue evolved. He noted that the ONS should not rush to produce digital SUTs due to the large amount of resource this would use, and the Committee agreed that trying to measure the digital economy should not be a priority for the ONS, because digital technology was in fact all-pervasive.

Chapter 23

1. The Chair also reviewed chapter 23 and had not identified any need to deviate. He noted it should not be a priority for ONS to identify processes of multinational enterprises (MNEs). He was satisfied with the principles but noted there may be some implementation challenges.
2. Rebecca acknowledged the implementation challenges and asked if there was coordination with other countries. The Secretariat noted that there was a globalisation task team that the ONS participated in. The Chair added that it would be interesting to understand if other countries felt that rapid progress could be made.
3. The Chair asked what adjustments ONS planned to make to historic data to reflect these issues, noting that historically ONS have used wedges to make adjustments.

Chapter 24

1. The Chair asked Rebecca to feedback on chapter 24: insurance and pensions. She noted that paragraphs 24.91 and 24.100 had attracted comments from other statistical organisations which highlighted inconsistencies with the final version of the chapter, and guidance notes that were agreed in the consultation process.
2. She highlighted that they did not capture all pension schemes within the SNA definition of a social insurance scheme.
3. The Committee agreed that the UK had a strong pension framework and recommended a deviation from the SNA. It proposed that all pension schemes regulated by UK pensions legislation should be treated as social insurance.

Chapter 25

1. David reviewed chapter 25 on financial instruments. He identified an implementation problem with stock options, noting that stock options were a common form of payments in start-ups where there was not necessarily any market in the shares.

Chapter 26

1. The Chair introduced chapter 26 on Islamic finance, noting that this chapter was less relevant for the UK. He thought it would pose an issue only with cross border financial assets and liabilities, and that he did not think it would be a large financial issue for the UK but would be grateful for confirmation from the BoE. Pat O’Connor said that he would liaise with colleagues and provide an answer to the Committee on this topic.
2. Ian questioned if there was an issue with the difference in treatment between branches and subsidiaries and the way in which they were separately regulated under UK law, and if this impacted Islamic finance. Pat agreed to provide clarity on this.

Chapter 29

1. David presented on Chapter 29. He explained that the chapter gave clear guidance on the sectoral breakdown. Specifically, paragraph 29.27 discussed financial technology, which was a helpful description of guidance and that the “of which” categories mentioned should be high priority for the UK.
2. Ian added that there is a growing importance to measure off market private based transactions. He continued, mentioning that they are a challenge to measure and are an increased concern of the cause of the next financial crash. Ian said, Implementation of this work would be challenging and that the ONS should look to the regulators to ensure trust in the guidance. Ian asked for Pat’s input to address how the BoE could capture that in-practice, given the opaque nature.
3. Pat agreed with the committee’s concerns and would inform BoE colleagues of questions and would bring answers back to the committee.

Chapter 31

1. Rebecca stated that the chapter did not offer anything that was controversial for the UK specifically, although, non-profit institutions were varied and that the thematic account gives institutions more visibility; ESCoE is supporting the ONS to have better data in that area. However, she highlighted the issue that institutions could end up in different institutional sectors, i.e. two institutions producing the same outcome one would be a corporation and the other would be NPISH.
2. The Chair noted that corporations primarily depend on fee income, while fee income constitutes a minor part of NPISH costs. He added, universities vary in reliance on fee income. Consequently, the Chair questioned whether the ONS and the committee would accept the possibility that some universities might be classified in different sectors due to the SNA, highlighting this could be problematic.
3. David mentioned that it may not be as problematic given that those universities that were heavily dependent on income could be qualitatively different to other universities.
4. Robert noted that the inclusion of the 50 per cent ‘rule’, as explained in SNA 30.27, for economically significant prices was provided in the global manuals to help compilers decide whether an institutional unit was a market producer or not. However, for economic and analytical reasons there could be specific cases and circumstances that justify deviation from strictly following this global “rule.”
5. The Chair agreed with Robert’s summary and mentioned that where institutions of the same nature could be separated into two different sectors, ONS should refer to NSCASE to ask what the best option would be to reflect UK circumstances.
6. Nick also noted that would not be too problematic for different corporations to be classified in different sectors, specifically in the case of universities.

Chapter 33

1. Paul explained that factoryless goods production should be treated as discussed previously, and there were no other issues.
2. Robert pointed out there was an issue over the adjustment for pension entitlements. BPM7 suggested adjusting the current account balance but this was not mentioned in the SNA. Robert asked whether the ONS would make the adjustment and advised using the approach given in BPM7.
3. The Chair agreed with Robert’s comments.

Chapter 34

1. Nick expressed there was no direct issue with the chapter.

Chapter 35

1. Nick expressed there was no direct issue with the chapter. However, there were reservations on ESG instruments but there would be no recommendation of deviation.

Chapter 36

1. Ian explained that it was an uncontroversial chapter at the “national level” and that there would be no need to deviate. At the “international level”, it has been difficult to address given the current international activity and that at this stage there is nothing to diverge from. However, this would need to be reviewed again in future.

Chapter 37

1. David mentioned that the “whom-to-whom” tables were a good way of presenting data.

Chapter 38

1. Rebecca highlighted that in previous discussion it was concluded it was appropriate for the ONS to adopt the new language around satellite account; now called thematic and extended account.
2. The Chair agreed and added that thematic and extended accounts was unlikely to be a priority for ONS due to resources.

Chapter 39

1. Ian iterated that the chapter did not fully explain how to measure the informal economy and that it gave a vague definition on the informal economy. Ian explained that the chapter would not be of significant importance for the UK given its highly developed regulations. He concluded there would not be a need to diverge.
2. David agreed and added that the chapter would be more relevant to developing economies.

6. 56th Session of the UN Statistical Commission

1. The Chair asked Richard Heys to present findings and feedback following the 56^th UN Statistical Commission.
2. Richard explained that whilst at the commission, the sideline discussions focused on resources required for implementation. He added that the UK raised concerns on the draft research strategy/prospectus given it did not outline a strategic approach and instead, gave a list of items that were not addressed during the 2025 revision. Richard said that the UK, therefore, continued to question of focussing on well-being and sustainability in the SNA given wider developments in this space, but also requested there was more substantive information on the level of ambition Countries had for delivery. This would ensure more honesty with users. Additionally, there was an expectation that countries may take a “two phase” approach, focussing on those changes which impact headline aggregates before moving onto the enhanced and thematic accounts.
3. Robert Heath welcomed the intervention and specifically welcomed the consideration of the needs of developing nations. Robert questioned whether there would be the resources available for the amount of work envisaged in the research agenda given the need to implement SNA25  and the work proposed to deliver a country level review of the Inter-Secretariat Working Group on National Accounts (ISWGNA) and Advisory Expert Group (AEG).
4. Richard noted that the research agenda needed to have clarity about what questions the SNA wants to answer moving forward, and there needed to be a general consensus on that. Richard gave the example that the SNA revision cycle was discussed in depth and widely from all parties. He said much of the discussion focused on how future revisions would take place and noted the IMF’s plan to do smaller, more regular revisions and reduce the amount of implementation. He explained that if the proposed IMF revision cycle could be the future position for revising manuals, there would need to be an overlap between implementing a shorter revision cycle alongside the current longer and larger revision format. Robust discussion and alignment would be needed across the international community for successful delivery.
5. The Chair suggested that the SNA manual was now too big and that splitting the manual into core chapters and peripheral chapters would have been sensible. Additionally, it would have relieved pressure for implementation.
6. David, agreed with this and stated that the SNA should be reformatted and more focus on compilers.
7. Kirsten Newton explained that a member led review of the ISWGNA was favoured by the international community and welcomed the approach, highlighted that it would provide transparency. Richard noted the driver was the need to ensure processes were effective and inclusive. The member led group have initiated this work and were now liaising with the Bureau of the Statistical Commission, where they would consider all available options.
8. The Chair asked what should NSCASE be doing to make the argument that the SNA needs to be simplified?
9. Richard explained that if the review was to be country led then country level committees such as NSCASE should have a mandate to feed in. He continued by explaining Eurostat issued a tender for an editorial team for the new ESA, which specified the desire to condense the SNA document to 650 pages for legislative purposes. Therefore, that suggested countries would be in favour of the review.
10. Nick asked was there analysis of the SNA08 delivery and if there was, did it provide a positive report. Robert responded by adding that there was an a global meeting after 2008 SNA was completed, which, inter alia, discussed how often to revise the SNA and launched the Inter-Agency Group that in turn stimulated the Data Gaps initiative in response to the global financial crisis. Nick further explained that, although a member led review did provide transparency it would not always provide the most successful outcome. 

7. Future of NSCASE

1. The Chair invited James Tucker to present.
2. James thanked the committee members and re-affirmed thanks from the National Statistician on the work the committee has undertaken across the three years. He highlighted that the National Statistician is committed to have NSCASE continue under the paper’s proposed changes; viewed as strengthening of stakeholder engagement. James continued by mentioning that NSCASE would have a renewed focus on international standards, continue strategic advice and if potential deviation was necessary. He explained that NSCASE would now run on a reduced frequency and would meet at least once a year. Meetings would be aligned with the international schedule, which would ensure the UK interest was represented at the highest level, and strategic implication for economic statistics would be fully understood and addressed. In addition, a new Advisory Panel on National Accounts (APoNA) would be set up, which would give national accounts an additional voice putting them on the same basis as the labour market and prices.
3. Robert, David, Ian and Nick, jointly expressed their disappointment on the changes to remove remuneration for committee members.
4. Robert asked for clarification on what James meant by “meetings driven by need”? He asked how would the three advisory panels – national accounts, prices and labour market statistics, be co-ordinated around the renewed NSCASE.
5. James explained that the proposed advisory panel on national accounts would allow for more technical focus and reading, which would provide more strategic focus for NSCASE. “Need” could be established via the chair or in line with participation in international fora.
6. Nick asked for clarification on the relationship between NSCASE and the new Advisory Panel on National Accounts, adding that there could be co-ordination issues. However, he pointed out that an advisory panel was required in order to have a voice in National Accounts as there is in Prices and Labour Market.
7. The Chair supported the comments made on remuneration. He also noted that the other panels were made up of experts in the relevant areas and that NSCASE should not try to second-guess their expertise. That was the principle he had followed over the last three years, but in practice there had been very few issues of possible overlap. He further asked if NSCASE had not been in place today would it have been set up, and added the committee would be unlikely to function as effectively if it was to only meet once a year. He also noted that the overhead costs of maintaining the Committee in being would not fall even if the number of meetings were to be reduced.
8. Richard explained that the plan for the future of NSCASE would see a meeting take place in the January of the year. This would allow preparation ahead of the UN Statistical Commissions and look ahead to other international consultation throughout the year. Furthermore, this would allow an opportunity for a second meeting to take place later in the year for review of progress. The Chair noted that this seemed to imply two meetings a year rather than one.
9. Richard added that co-ordination would ensure alignment with the other committees by having the respective chairs as ex officio members of NSCASE committee.
10. The Chair argued that any future structure needed to ensure that NSCASE had clear mechanisms for influencing the outcome of international deliberations, including clear channels of communication. He thought members had found it unsatisfactory that, so far, their feedback had come too late to be able to influence what was in the international manuals.
11. Nick highlighted the importance of remaining aware of the work taking place in the international fora adding that it was not just the UN and Europe that would need attention but other fora as well. Nick suggested ONS should consider engaging with OSR to ensure the re-structuring was handled appropriately.
12. Craig McLaren agreed that co-ordination across the advisory panels would be crucial. The addition of APoNA would create suitable synergy across the ESEG directorate. He continued to mention that overlaps between the NSCASE committee and the advisory panel would be likely, and it would appear when there is need for additional opinions on items raised.
13. Robert agreed that it would be advantageous to have the respective chairs of the advisory panels as ex officio members of NSCASE. It would also be a requirement to review other international manuals such as GFSM.
14. Richard re-affirmed the position on the difference of the NSCASE committee and advisory panels; NSCASE would have a view on what ONS would deliver and the advisory panels would have a supporting role on how it would be delivered.
15. James concluded the item by highlighting that there would be further internal discussion on how to proceed and organise the Terms of Reference for the reformed NSCASE. Once that was completed, committee members would be informed.

8. Any other business

1. The Chair thanked the committee for the work that they had done over the course of the three years in which NSCASE had run. He highlighted the list of deviations, which indicated a considerable amount of work done. He noted that it was not possible to fix a date of the next meeting given the uncertainty surrounding the reformed structure of NSCASE.