1. ONS Economic Forum Email:economicforum@ons.gov.uk Twitter:@ONS #ONSeconomy Website: http://www.ons.gov.uk/ons/about-ons/get- involved/events/events/economic-forum/index.htmlhttp://www.ons.gov.uk/ons/about-ons/get- involved/events/events/economic-forum/index.html WIFI code for Glaziers Hall: event123 13 July 2015 1

2. ONS Economic Forum – July 2015 09.45Introduction & welcome 10.00What’s new 10.40What’s next 11.20Refreshment break 11.50Productivity 12.30Close Agenda 2

3. Introduction and welcome Jonathan Athow, Deputy National Statistician for Economic Statistics ONS Economic Forum 13 July 2015 3

4. What’s new Peter Patterson, Deputy Chief Economic Adviser ONS Economic Forum 13 July 2015 4

5. New construction price deflator, impact on GDP growth Highlights from latest ONS economic statistics Income and earnings statistics – impact of taxes and benefits on household incomes, median incomes UK Statistics Authority trade statistics assessment Flow of Funds - initial outcomes, inc. loans matrix What’s new - outline 5

6. Interim solution – the basics A project cost approach is used where we enumerate the input costs of different construction projects and use this as a proxy for output prices We have developed indices for: All new work types Repair and maintenance All construction 6

7. Interim solution – the basics New work To measure price change for the new work projects, price changes for three categories are measured: 1.Labour (AWE for construction excluding bonuses) 2.Plant (SPPI) 3.Materials (relevant PPIs based on PPPs) Repair and maintenance Measurement of price changes for two categories of input: 1.Labour 2.Materials 7

8. Interim solution - strengths and limitations Strengths Open and transparent, based on real data Uses existing ONS data Monthly series can be created Limitations Assumes that input costs move in the same way as output prices Assumes that productivity is constant Representative projects are selected by Eurostat and may not be representative of the UK Limitations around PPIs 8

9. Results The interim solution has been implemented from January 2014 onwards To account for changes to seasonal patterns a seasonal review was also implemented at the same time Late data has also been incorporated. 9

10. Implied construction price deflator 10

11. Output in the construction industry 11

12. Revisions to GDP growth Period on period Period on a year ago Revision to construction growth Construction revision to GDP Growth Actual revision to GDP Growth (QNA Q1 2015) Revision to construction growth Construction revision to GDP Growth Actual revision to GDP Growth (QNA Q1 2015) 2014 Q10.420.030.000.440.030.00 2014 Q20.870.060.081.380.09 2014 Q30.470.030.101.860.120.18 2014 Q42.360.150.224.380.280.41 2015 Q10.920.060.07 4.720.30.47 12

13. QNA: revisions to GDP growth estimates 13 Revisions to expenditure and output measures of GDP/GVA growth, CVM measures, changes on same quarter of previous year, percentage points

14. Business services & finance output 14

15. GDP and household expenditure deflators 15

16. Private sector financial balance 16

17. PNFCs’ income and expenditure 17

18. Regular pay growth, private sector 18

19. Earnings growth and continuous employment 19

20. Part-time employment trends 20

21. Average weekly hours worked 21

22. Current account balance 22

23. Primary income balance 23

24. Official statistics on income and earnings – looking forward UK Statistics Authority event, 2 July – users and producers met to discuss a range of income and earnings statistics Feedback on a number of prototype outputs: Alternative measures of RHDI (eg cash based measures) Supplementary analysis of trends in earnings (eg analysis of composition effects in ASHE) Nowcasts of median household income Price indices for different sub-groups of Real income indices for different sub-groups Understanding user priorities: Better and more timely data on self-employment income – a key priority because of the increasing scale of self-employment Increase awareness of available datasets and guidance More focus on changes in business environment and productivity story e.g. wage dynamics 24

25. Well-being indicators 25

26. Effects of Taxes & Benefits 26 Effects of Taxes & Benefits (annual article) published 29 June 2015 Provides important insights into distributional impact of taxes (direct and indirect) and benefits (including in-kind transfers provided by state) Provide a consistent time series of key income measures (e.g. median disposable income) going back to 1977 Main messages: Overall levels of income inequality in 2013/14 broadly unchanged on other recent years. However, inequality among retired households increased, with the Gini coefficient for disposable income rising to 27.2%, up from 24.3% in 2009/10. Before taxes and benefits, the richest fifth of households had average income 15x higher than poorest fifth. Ratio reduces to 4-to-1 after all taxes & benefits. Median disposable income in 2013/14 was £24,500 – higher than in 2012/13, after accounting for inflation and household composition, but still below the level seen in 2007/08 The median disposable income of retired households was 7.3% higher in 2013/14 than in 2007/08, compared with 5.5% lower for non-retired households.

27. Original and final income by quintile, 2013-14 27

28. Headlines: Effects of Taxes & Benefits 28

29. Distribution of growth in household incomes 29

30. Headlines: Effects of Taxes & Benefits 30

31. Nowcasting household income 31 ETB and other statistics on income distribution currently published around 15 months after end of reference period Other income measures (e.g. RHDI per capita) more timely but do not reflect distribution In response to considerable user feedback, ONS investigating ‘nowcasting’ techniques to provide early estimates of key ETB indicators: Median equivalised disposable income Distributional measures Initial methodological article was published 1 July 2015 Further work still needed to refine methodology Aim is to share progress to date and get feedback on methodology and further understand user requirements Need to ensure nowcasting can deliver estimates that are fit for purpose Continuing development over summer Aim to publish experimental 2014/15 estimates taking into account feedback received

32. UKSA assessment of UK Trade Background Nov 2014 – UK Statistics Authority removed National Statistics Status from UK Trade May 2015 – UK Statistics Authority published Assessment of Statistics on UK Trade Requirements summary Assessment includes 13 requirements that must be completed by ONS in order to regain National Statistics Status for UK Trade The requirements include the following areas: User engagement Methods Quality International comparison Systems Developments Commentary and analysis Accessibility 32

33. UKSA assessment of UK Trade ONS Response ONS is expected to report its completed actions to the UK Statistics Authority by February 2016 ONS is engaged in a range of improvements and developments to address the requirements, including: Publication of results and planned response to a recent user survey Additional analysis of quarterly Trade in Services in monthly bulletin Expanded quality information, development & publication of technical report Review of trade data published by other countries Publication of information about assurance arrangements for admin data Development of a new ONS Trade web page ONS is committed to meeting the requirements and regaining National Statistics status for UK Trade as soon as possible and will keep users informed of progress 33

34. Late 2014: ONS began work on a joint project with the Bank of England to develop Flow of Funds statistics 13 July 2015: Joint ONS and Bank of England article published : Outlines the project, progress, and future programme; Includes first ‘from who-to-whom’ matrix: balance sheet levels of loans Feedback welcome: flowoffundsdevelopment@ons.gsi.gov.ukflowoffundsdevelopment@ons.gsi.gov.uk Summer / Autumn 2015: Spending Review 2015 bid to be submitted: detailing options, plans and costs for future development of flow of funds Flow of Funds 34

35. Flow of Funds 35 A from-whom-to-whom balance sheet matrix for total loans, 2013, unconsolidated current prices, £ billion Liabilities: Assets:PCPNFCMFIOFIICPFCGLGHH+NPISHRoWTotal PC 0.80.1 --0.00.40.00.92.3 PNFC 0.4- 51.7-4.70.0 214.9271.8 MFI 0.2406.0 752.917.14.410.71,192.2898.83,282.4 OFI 0.044.7 3.6--0140.940.7230.1 ICPF 0.077.1 71.1-0.02.428.412.9191.9 CG 1.35.5 0.0--64.2119.73.7194.4 LG 0.20.1 0.0- -7.7-8.1 HH+NPI SH 0.02.3 13.50.5-0.12.4-18.7 RoW 1.1434.2 969.341.50.15.432.61,484.2 Total 4.0969.9 1,862.259.19.383.41,523.81,172.0

36. What’s next Nick Vaughan, Director of National Accounts and Economic Statistics ONS Economic Forum 13 July 2015 36

37. What’s Next – outline Blue Book – update and next steps National Accounts work programme, post consultation Measuring consumer prices – post consultation Impact of population estimates on economic statistics Claimant Count definition change - impact 37

38. Blue Book 2015 - update So far: Series of methodological articles relating to ESA95, ESA10 and other (Mar – May) Impact article – GDP in current prices 1997 to 2010, levels and growth (12 th Jun) To come: -Series of impact articles - GDP real terms, annual and quarterly to 2013 -17 th July, 5 th August and 11 th September -30 th Sep: Quarterly National Accounts & Balance of Payments consistent with Blue and Pink Books -30 Oct 15: Blue and Pink Books published 38

39. Scope Three types of changes: 1.GNI: improvements to remove ESA 1995 reservations 2.Classification changes 3.Other methodological changes 39

40. Impact of ESA 1995 on GNI levels (indicative) -£11.9bn or 0.1% of total GNI over the 2002 to 2010 period 40

41. Impact of ESA 2010 on GDP levels, CP (indicative) Between 1997 and 2010, CP GDP level revised by a range per year of -£2.8bn to +£4.8bn 41

42. Contributions to changes to CP GDP annual levels, ESA 2010 basis: indicative impact Between 1997 and 2010, CP GDP level revised by a range per year of -£2.8bn to +£4.8bn 42

43. Impact of ESA 2010 on GDP growth, current prices: indicative GDP annual growth, current prices, revised each year by between -0.4pp to +0.3pp 43

44. Blue Book 2015 – What is still to come 44 ContentProvisional Date Impact on GDP Chained Volume Measure annual and quarterly estimates 1997-201017 July 2015 Impact on GDP Current Price and Chained Volume Measure quarterly and annual estimates 1997-2013 5 August 2015 Summary of impact of changes on Sector and Financial Accounts 1997-201311 September 2015 Summary of impact of changes on Balance of Payments 1997-201311 September 2015 Quarterly National Accounts Q2 2015 (consistent with Blue Book 2015)30 September 2015 Balance of Payments Q2 2015 (consistent with Pink Book 2015)30 September 2015 Impact of changes in the national accounts and economic commentary for 2015 Quarter 2 (Apr to June) 30 September 2015 GDP(Output) improvement project report30 September 2015 Blue Book and Pink Book 201530 October 2015

45. National Accounts Medium-Term Work Plan 2013 - National Accounts Work Plan published Blue and Pink Books 2014 - ONS delivered significant changes in line with revised international standards 2014 - National Statistics Quality Review of UK’s National Accounts and Balance of Payments Today - refreshed Medium-Term Work Plan published

46. NA Medium-Term Work Plan - Scope Briefly reflect upon progress since the first work plan Provide users of National Accounts with sight of the high priority aims for National Accounts over the medium term Provide a high level plan of how the high priority aims will be delivered over the next 3 years

47. How Can You Help? Whilst not a formal consultation we would welcome comments on the work plan, in particular:  Are there any priorities not included in the work plan?  Of the priorities covered in the plan which ones are the highest priority for your needs?  Which of the priorities included in the work plan could be dropped or slowed to allow other priorities to be pursued?

48. How To Contact Us Copies of the work plan available today Published on the ONS website http://www.ons.gov.uk/ons/about-ons/get- involved/consultations/open- consultations/index.html Comments - please email nationalaccounts@ons.gsi.gov.uk

49. Measuring Consumer Prices consultation UK Statistics Authority consultation Opened: 15 June 2015 Closes: 15 September 2015 Follows Johnson Review of consumer price statistics Seeking user views on 4 areas: -Measuring prices across the economy -Measuring consumer price inflation for different household types -RPI -Evolving consumer price statistics

50. Measuring Consumer Prices consultation User events: -London event held on 24 June 2015 -Series of events planned across the UK including Belfast, Cardiff and Edinburgh (details to follow) Consultation document: http://www.statisticsauthority.gov.uk/reports--- correspondence/consultations/index.html

51. Impact of 2014 mid-year population estimates on Labour Force Survey aggregates Current Labour Force Survey (LFS) aggregates weighted using population estimates from the 2012-based National Population Projections (NPPs), which are consistent with the 2012 mid-year estimates (MYEs), published in 2013. N.B. The 2013 MYEs are not reflected in the current LFS aggregates, although they are very similar to the projections for mid-2013. 2014 MYEs published on 25 th June 2015 - population aged 16+ increased by 396,000, or 0.76% between 2013 and 2014. Compares with projected growth of 351,000, or 0.67% that LFS currently uses An impact assessment has been produced to estimate the likely impact of the updated population growth on the headline LFS aggregates.

52. Key impact areas  Assessment indicates likely impact on LFS aggregates (16+) in mid- 2014 will be around +22,000 for the employment level -1,000 for unemployment +12,000 for economically inactive. LFS aggregates for mid-2013 are likely to be revised down slightly due to MYEs for 2013 being lower than the projections currently used. Revised employment level growth between May-Jul 2013 and May-Jul 2014 estimated to be +27,000 or 2.4%, compared with 2.2% currently. Headline employment and unemployment rates are not expected to show any differences as a result of the new population estimates.

53. Likely outcome Impact of revised MYE for mid-2014 on headline LFS estimates well within sampling error. No interim adjustment will be made to published LFS figures before full reweighting next year. It is recommended that users continue to use estimates as published. Under the established procedures, the LFS aggregates and microdata will be reweighted in early 2016 using revised population estimates consistent with the 2014 MYEs published in June 2015 and the 2014-based NPPs to be published end of October / early November 2015.

54. Claimant Count – impact of new definition From 17 June, Claimant Count includes Universal Credit claimants as well as Jobseeker’s Allowance UC data includes a small number of non-jobseekers – ONS will be able to separately identify these later this year Currently, ONS publish gender and region breakdown Future releases will include age and more geographical breakdowns Duration of claim will follow when data are available

55. Claimant Count – definition change 55

56. Productivity Puzzle – knowns and unknowns Mark Franklin, Head of Productivity ONS Economic Forum 13 July 2015 56

57. 57 Outline What is it? What do we know about it? What don’t we know? What are we doing to fill the gaps in our knowledge?

58. So what’s the puzzle?

59. UK Productivity Growth Following Recessions

60. 60 Outline What is it? What do we know about it? What don’t we know? What are we doing to fill the gaps in our knowledge?

61. A jobs (and hours) rich recovery...

62. ... the puzzle is broad-based...

63. ... it’s not unique to the UK... Source: ONS

64. ... and not just labour productivity that is puzzling...

65. ... productivity varies across firms... Estimates for 2010

66. 66 No shortage of explanations Changes in behaviour of the labour market (migration, participation rates, jobs mix, real earnings etc) Labour hoarding Weak investment Missing investment Compositional effects Aftermath of financial crisis Structural/secular stagnation Policy too tight Policy too loose

67. 67 Outline What is it? What do we know about it? What don’t we know? What are we doing to fill the gaps in our knowledge?

68. 68... about labour? We have less information on self-employment than employees Micro-businesses not covered by business surveys LFS does not collect earnings from self-employment ASHE covers employees only Boundary issues We don’t know much about labour input at the firm level Annual Business Survey (ABS) collects information on employment costs, but not numbers of workers, hours, composition etc Challenging to match separate labour market sources (ABS, BRES, ASHE, LFS)

69. 69... about capital? Limited information on capital scrapping and capital utilisation Improved coverage of intangible investment but there is further to travel Software and R&D deflators under development Some intangibles not in ESA rulebook Measurement of capital services is in its infancy We don’t know much about capital input at the firm level Limited asset breakdown in survey data Time series only for the largest firms

70. 70... about output? Are we measuring output accurately? Measurement of some activities is more straightforward than others Output measures are balanced against other dimensions of GDP – expenditure and income We (and others) think so. No evidence that something changed in 2010 (in UK, GE, FR...) BoE analysis suggests measurement could account for 2ppts of 16% gap But we are not complacent. National Accounts Work Plan Reintroduce Purchases Survey...

71. 71 Outline What is it? What do we know about it? What don’t we know? What are we doing to fill the gaps in our knowledge?

72. 72 Productivity work packages Labour inputs Triangulation between sources, with particular focus on improved granularity of firm-level estimates Capital inputs Triangulation between micro and macro estimates of capital flows and stocks Use firm-level demographics to estimate capital scrapping Growth accounting Re-instate KLEMS growth accounting framework Public sector productivity Quality adjustment in education Improve output estimates in other service areas Improve timeliness of publications

73. 73 Contact details productivity@ons.gsi.gov.uk mark.franklin@ons.gsi.gov.uk +44 (0)1633 455 981

74. ONS Economic Forum Email:economicforum@ons.gov.uk Twitter:@ONS #ONSeconomy Website: http://www.ons.gov.uk/ons/about-ons/get- involved/events/events/economic-forum/index.htmlhttp://www.ons.gov.uk/ons/about-ons/get- involved/events/events/economic-forum/index.html 13 July 2015 74