What’s next Peter Patterson, Deputy Chief Economic Adviser Graeme Walker, Head of National Accounts ONS Economic Forum 10 July

What’s next Johnson review of price statistics (autumn) Re-weighting of LFS estimates using 2011 Census data (October) – historic data in September Blue Book

Improvements to National Accounts in September 2014 Graeme Walker Head of National Accounts ONS Economic Forum: 10 July

Outline What improvements are being made? Impact on GDP Current price levels Real GDP growths Other impacts Public Sector Finances Sector and Financial Accounts Balance of Payments International experience 4

Improvements New international frameworks (ESA 2010, BPM6, MGDD) Improvements to methods New data (not relevant for period up to 2009) 5

New International Frameworks R&D Weapons Decommissioning costs Pensions BPM6 changes 10 June articles 6

Improvements to methods Review of Non-Profit Institution serving Households units (NPISH) Financial Intermediaries Services Indirectly Measured (FISIM) Illegal Activities New Cars Own-account construction Exhaustiveness adjustments Gross Fixed Capital Formation Inventories 29 May articles 7

Impact on GDP levels (97 to 09) Average revision +3.6% (£43 bn) ESA % (£24 bn) Methods improvement +1.6% (£19 bn) Biggest impacts (average) R&D +£17 bn NPISH review +£9 bn Illegal activities +£9 bn Weapons +£3 bn Pensions +£3 bn 8

Revisions to GDP levels 9

10

Real GDP annual growths Average growth still +2.2% still +3.2% stronger than in BB13 but very similar to BB12 Some changes to path 99, 01 and 09 are stronger 00, 04 and 07 are weaker Final analysis of downturn requires quarterly path (to be published early September) Length of downturn looks to be the same Depth of downturn looks to be a bit shallower but similar to BB12 11

Revisions to Real GDP growths 12

Annual Real GDP growth rates in various Blue Books 13

Public Sector Finances PSND increased by around £30bn in recent years all due to the reclassification of network rail to central government PSF only change at this stage due to timing of advice from Eurostat PSNB generally increased by £2bn - £4bn in recent years mainly due to network rail and change in treatment of Local Authority pension schemes Pension scheme impact on GDP already described; network rail is PSF only Change to treatment of receipts from 3G/4G mobile phone licence auctions alter the PSNB profile increase of £22bn in 2000 offset over subsequent years PSF only change due to timing of advice from Eurostat 14

Public Sector Finances Change to treatment of the Royal Mail Pension Plan transfer also alters the profile of PSNB increase of £36bn in 2012 offset over subsequent years current/capital transfers with no impact on GDP Weapons/R&D capitalisation switches spending from current budget to net investment without changing PSNB (GDP impact already described) Changes announced in December/February with detailed article published in June PSF bulletin now includes detailed estimates of ESA10 impact on deficit and debt 15

Comparison of PSND measures 16

Comparison of PSNB measures 17

Sector and Financial Accounts 9 July article NPISH – uplifts both NPISH and household final consumption expenditure (as HHs consume NPISH goods and services) Changes to the reference rates, removal of interbank FISIM and adjustments to FISIM imports will impact all sectors, especially HH Illegal activities will increase HH expenditure, intermediate consumption and mixed income Car list prices will reduce HH expenditure by less than £1 billion per year Exhaustiveness adjustments impact HH expenditure both positively (fuel) and negatively (gambling and digital TV) 18

Sector and Financial Accounts (part 2) Own account construction increases PNFC and HH fixed capital formation R & D impact on gross fixed capital formation will be seen across the sectors Weapons systems capitalisation impact will be seen in the government sector Pensions – new service charge methods and including funded defined benefit schemes for local government and NPISH increases their expenditure and output Detailed impact and changes which only impact on 2010 and later to follow on 12 August 19

Balance of Payments (BoP) Biggest change - measurement basis of direct investment profits for monetary financial institutions changes from an all inclusive (AI) to a current operating performance basis (COP) Other changes include: Revised treatment of non monetary gold Introduction of remote gambling Revised treatment of goods sent abroad for processing Overall impact of BoP changes: Before financial crisis – improvement in current account balance During the financial crisis – deterioration in current account balance 20

International experience Worldwide implementation of SNA 2008 completed for US, Canada and Australia Impacts described by ONS for UK GDP are of the same magnitude and direction as those seen across EU member states and worldwide ONS has already provided more detailed information than most countries Most impacts expressed in nominal terms 21

International Comparisons (Part 2) 22

Publication Schedule 9 July– Summary of impact on Sector and Financial Accounts (SFA) and Balance of Payments, International Comparisons, Layout of Blue Book, Pink Book and UKEA publications 23 July - Impact on GDP components of ESA 2010 and non ESA 2010 changes for 1997 – August (prov) – Detailed impact on SFA and Balance of Payments 23

Publication Schedule (part 2) Mid/End August – 2012 real and nominal GDP annual changes Early September – Reminder of all impacts plus quarterly path of real GDP September – Publication of Quarterly National Accounts and Balance of Payments on ESA 2010/BPM6 basis 31 October – Publication of Blue Book and Pink Book