1. abcdefghijkl The Atkinson Review in Scotland - progress to date. Sandy Stewart Office of Chief Economic Adviser 22 August 2007

2. abcdefghijkl Outline of Presentation Recap on history Public Sector contribution to GDP Progress to date/proposed changes to GDP What to expect in October

3. abcdefghijkl Atkinson Review - History  2003 - No 10 !  Tony Atkinson – 1 Year’s commission  Interim Report – July 2004  Final Report – January 2005  54 recommendations to improve the measurement of public services output and productivity  Implementation Strategy for Scotland – April 05  Action Plans – updated quarterly  Working teams set up in Scottish Executive.  Established strong(ish) links with ONS UKCeMGA.

4. abcdefghijkl Atkinson: summary of key principles  Principle A: the measurement of government non-market output should aim to follow a procedure parallel to that adopted for market output.  Principle B: the output of the government sector should in principle be measured in a way that is adjusted for quality of the service delivered.  Principle C: account should be taken of the complementarity between public and private output – e.g. NHS output increasing private sector productivity.  Principle E: measures should cover the whole of the United Kingdom; and reflect regional variation in the delivery of public services and/or data collection.  Principle F: the measurement of inputs should be as comprehensive as possible, and in particular should include capital services – e.g. imputed rent for buildings  Principle G: Pay and price deflators should be sufficiently disaggregated to take account of changes in the mix of inputs; and should reflect full and actual costs.

5. abcdefghijkl Historical context  Atkinson is not new  Previous assumption of outputs=inputs  System of National Accounts 1993  European System of National Accounts 1995  Eurostat price and volume handbook (2001)  A methods: multiple direct measures of output, quality adjusted  B methods: Output indicator, not quality adjusted; or multiple quality adjusted input measures for collective services  C methods: Use of single input volume indicators (e.g. employment)  OECD productivity manual (2001)  ONS response to ESA95

6. abcdefghijkl Actions  Supply data to ONS for UK National Accounts.  Replicate productivity analysis for Scotland.  Ensure UK assumptions make sense for Scotland.  Consider inclusion in Scottish GDP system.  Consider policy relevance of new measures

7. abcdefghijkl GDP – weights and series SectorWeight (percent)Number of Series Agriculture etc2%7 Oil & Mining1%4 Manufacturing15%144 Energy & Water3%3 Construction7%11 Services50%78 Public Services22%19 Total100%266

8. abcdefghijkl Atkinson Recommendations Input (proxy)Poor Total Inputs - deflatedBetter Output (proxy)Even Better Total quality-adjusted Output - deflated Good!

9. abcdefghijkl The October Deadline  New economic target makes Scotland/UK comparability ESSENTIAL!  Opportunity to introduce more cost weights – constrained to Regional GVA  Will introduce as many new measures as possible into GDP in October  Ideally quality-adjusted output  Happy to implement simple output measures if they are similar to UK  May consider revised input-based methods if they are an improvement over current estimates.  Improve scope for further incremental improvements.

10. abcdefghijkl Public Administration and Defence 7.2% of Scottish GVA Current measuresProposed measures Civil Servants – numbers employedFTE employment in Civil Service by grade, weighted by salary. Armed Forces – personnel based in Scotland.Total persons employed in defence in UK, adjusted by population share. Number of administrative and clerical staff in NHS FTE employment by grade, weighted by salary. FTE employees in Local GovernmentFTE employment by grade, weighted by salary. Scottish LA Police and related services numbersDeflated expenditure on police services; direct measures of output for probation, courts and prisons systems. LA FTE employment on Fire ServicesDirect output measures – numbers of fires attended, weighted cost by type; hours spent on fire prevention activities; RTAs.

11. abcdefghijkl Education 6.5% of Scottish GVA Current measuresProposed measures Primary school teachers/ Secondary school teachers Direct measure of output: number of pupils, adjusted by attendance and quality adjustment for changes in attainment. New measures: special education, teacher training and nursery education. HE/FE teachersNumber of students initially, but will consider a direct measure of attainment in future LA – other education employeesTo be determined – may be subsumed within primary/secondary University lecturers.Number of students. Number of grant-aided and independent teachersNumber of students.

12. abcdefghijkl Health 6.2% of Scottish GVA Current measuresProposed measures Health: Employees in Employment: NHSTo be determined. Possible change to deflated expenditure whilst a direct measure of quality adjusted output is finalised. GPsDitto. DentistsDitto. Private and other HealthNo change. Veterinary practicesNo change.

13. abcdefghijkl Social protection 6.2% of Scottish GVA Current measuresProposed measures FTE Employees in LA Social Work Actiivities New direct measures of output for adult and children’s services; number of bed- nights in residential care, number of hours in day care and domiciliary care, number of referrals etc. Non-LA employees in Social Work activities Ditto.

14. abcdefghijkl Conclusions  Significant methodological improvements to be introduced in October  Greater transparency  Improved coherence with UK methods  Greater scope for future improvements  Too early to gauge full impact