1. Measurement of Government Output and Productivity for the National Accounts:
Tony Atkinson

2. Background SNA/Eurostat Revisions Political salience of public sector
Comparing economic performance

3. ONS Programme of Introducing Direct Output Measures 1998-

4. Education: 1963-2003 GDP Input index With quality adjustment
300
280
260
GDP
240
220
Input index
200
180
160
With quality adjustment
140
120
Direct output measure
100
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003

5. Key Messages of UK January 2005 Report
Cannot go back to assuming output=input
ONS among pioneers, but “first generation” methods need to be refined
Report sets out a principled approach
Improve measures of government inputs as well as outputs
Need for increased statistical resources to be allocated to measuring government outputs and inputs

6. Principles
Output
A: Government non-market output should, as far as possible, be measured following a procedure parallel to that adopted for market output.
B: Output should in principle be measured in a way that is adjusted for quality.
C: Account should be taken of the complementarity between public and private output.
D: Formal criteria should be established for extending direct output measures to further services.
E: Measures should cover the whole of the UK.

7. Principles Inputs and Productivity
F: Measures of inputs should be as comprehensive as possible, and should include capital services.
G: Criteria should be established for pay and price deflators applied to input spending series.
H: Independent corroborative evidence should be sought on government productivity, as part of a process of “triangulation”.
I: Explicit reference should be made to the margins of error surrounding national accounts estimates.

8. Measuring outputs
“First generation” direct measures of government output were pioneering, but revealed the need for major improvements, improvements that are in part already underway.
Output indicators have been
limited in their coverage of activities;
too aggregate;
inappropriate classifications have been adopted;
geographical coverage of the UK has been incomplete;
indicators affected by changes in the machinery of government;
there have been issues of timeliness.

9. An illustration: social services

10. Measuring inputs
Examination of data flows required to measure inputs has led us to identify the following issues:
complex flows involving multiple suppliers;
problems in data classification, necessary to deflate inputs and measure productivity;
poor timeliness and periodicity;
no clear line of sight from initial data supplier to ONS end user,
new data system should rectify a number of these problems but has to be implemented in a way that recognises needs of ONS .

11. Some conceptual issues
1993 SNA
“There is no mystique about non-market health or education services which make changes in their volume more difficult to measure than volume changes for other types of output, such as financial or business services”.
“In principle, volume indices may always be compiled directly by calculating a weighted average of the quantity relatives for the various goods or services produced as outputs using the value of these goods and services as weights.”.

12. But ? Marginal cost Marginal valuation Marginal cost
Service 1
Service 2

13. But ?
The value of property protected by the fire service has risen by x% per annum more than the GDP deflator.
Should this be treated as a quality improvement?

14. After the Review:
ONS established Centre for the Measurement of Government Output
Work in UK Departments and Devolved Administrations
Eurostat
OECD National Accounts Working Party (SNA Revision)