Economy, Business and Trade

Early in 2013 the UK Statistics Authority removed the National Statistics designation of the Retail Prices Index (RPI) because the methods used to produce the RPI were not consistent with internationally recognised best practices and because ONS had decided to freeze the methods used to produce the RPI. For a mix of reasons, including considerable evidence of ongoing needs of users to continue using RPI, carried on publishing RPI statistics as legacy statistics.

In 2013, ONS introduced a Consumer Prices Index including owner occupiers’ housing costs (CPIH) which ONS describe as its most comprehensive measure of consumer price inflation. After introducing CPIH as its preferred inflation index in 2017, ONS encouraged users to adopt alternative indices to the RPI, but many years on RPI remains widely used. RPI is still used to make changes to tax allowances, wages, state benefits, pensions, contracts, rail fare increases, student loan repayments and many other payments. OSR, alongside for example the House of Lords Economic Affairs Committee, discourages ‘index-shopping’ where users, including the UK Government, favour the use of one price index over another, by exploiting the differences in the indices, without a strong rationale for the choices made.

OSR is clear that one of ONS’s key roles is to support all users to further understand the characteristics and behaviour of CPIH and continue to build up the credibility of CPIH. As ONS’s preferred inflation index, users should be confident to use CPIH as a comprehensive measure of movement in consumer prices in the UK economy.

OSR has supported ONS in its setting out of use-cases for each of three indices (some refer to this as a ‘three-family approach’). We regard this as presenting a clear and coherent picture about how each inflation index meets the range of user needs and a guide to choosing an appropriate index to meeting their needs. These use-cases are:

• A comprehensive measure of inflation, based on movements in the general price levels in the economy: CPIH
• A set of measures to reflect the change in costs as experienced by households: the Household Costs Indices (HCIs)
• A legacy measure that is required to meet existing user needs: the RPI

OSR has encouraged ONS to keep its narrative about the use-cases current. ONS and HM Treasury are jointly running a consultation on proposals to bring the methods of CPIH into the RPI and when such changes should be introduced. The outcomes of this consultation could affect the current three-family use-cases. ONS should reflect on how any changes in bringing the methods of the CPIH into the RPI affect the descriptions of the distinct uses of each inflation index. We encourage ONS to consider how the descriptions of the use-cases can assist in promoting the appropriate adoption of CPIH as the preferred comprehensive measure of inflation.

Throughout the changes ONS are consulting on, OSR has expressed the expectation that ONS continues to focus attention on user engagement, and work closely and positively with interested users.

Summary

The Office for National Statistics’ (ONS’s) UK trade statistics are produced using high quality systems and processes. Data inputs are quality assured with suppliers and statistical estimates of the UK’s exports and imports are compared with those of trading partners to help better understand quality. Differences in these comparative measures, however, mean that a degree of uncertainty exists around the quality of these statistics and users will need to continue to take this into account in their use. ONS has made notable progress in understanding the scope and structure of these asymmetries and what they mean for quality.

OSR Position

ONS’s UK Trade statistics were de-designated as National Statistics in 2014. Since then, ONS has made significant efforts to improve the quality of these statistics. Improvements have been achieved through a systematic review of statistical processing that has allowed ONS to identify and remove errors in published statistics. ONS is also making further improvements to increase transparency on data quality assurance processes and improve management of data processing following input from the Government Data Quality Hub.

One of the main remaining questions over the quality of ONS trade estimates arises from the uncertainty around differences in estimates of bilateral trade known as asymmetries[1]. All countries have asymmetries and addressing them is challenging.

ONS has made significant strides during the last year to understand and begin quantifying the factors and causes of the UK’s bi-lateral trade asymmetries. In February 2021 the Economic Statistics Centre of Excellence (ESCoE) published a paper on Using a model to understand more about UK trade in services asymmetries. The paper uses a methodology developed by the Organisation for Economic Co-operation and Development (OECD) and the World Trade Organisation (WTO) to produce a reconciled asymmetry dataset for UK trade-in-services. The resulting dataset confirmed that the most challenging measurement issue for UK trade statistics lies with the recording of trade-in-services imports.

Coverage of trade-in-services activity was enhanced in 2018 by an increase to the size of the International Trade in Services Survey (ITIS) sample. This enabled ONS to expand its trade-in-services statistics by country, activity, industry, business characteristics and mode of supply. The survey sample has also been re-designed to enable better understanding of the service trade activity of small UK businesses. This will help to improve the quality of estimates of trade-in-services, particularly of imports.

ONS plans to use these improved data, and to continue to work with the OECD, the WTO and trading partners, to further understand and explain asymmetries. This improved understanding will be of significant value to policy makers and the newly appointed cross-party commission on trade as the UK reviews its trading relationship with Europe and negotiates trade deals with non-EU countries.

Resolving asymmetries is challenging, but with trade talks ongoing, it is imperative that the momentum generated over the last year continues to ensure that these issues be resolved quickly to ensure that the statistics used to inform future discussions meet with the requirements of the Code of Practice for Statistics.

[1] Asymmetries are differences in trade data reported by one country and the corresponding data reported by a bilateral trading partner.