Iain Russell, OSR theme lead for Economics, blogs on his recent regulatory work looking at the public value of devolved public finance statistics. This work also looked at the extent to which devolved investment statistics are seen as a priority for development in the UK’s devolved countries.
“An investment in knowledge pays the best interest” – Benjamin Franklin
“The field of behavioral economics analyzes imperfections in market decision-making, but the biggest practical problems often involve our inaccurate perceptions of what the public sector is up to and how much it will affect us.” – Tyler Cowen, New York Times
What have we been doing and why?
Last year, the OSR started thinking about the public value of statistics on devolved public finances, focusing on transparency and coherence. These statistics play a central role in public debate but getting accurate perceptions of what the public sector is up to and how much it affects us can be challenging. We have captured our thoughts about the public value of these statistics in different ways – for example through two presentations we prepared about the two phases of our work, through a YouTube interview and in a regulatory report into our assessment of some of the key source statistics on public spending in the countries and regions of the UK from HM Treasury. All of these have been published today.
Mention the word ‘statistics’ in social settings and the MEGO (my eyes glaze over) factor starts to set in. Follow that up by dropping into conversation terms such as ‘tax revenues’, ‘spending data’ and ‘budgets’ and people are heading for the hills. So, on the face of it a blog about regulatory work on looking at the prospects for improving the transparency and coherence of statistics on tax, spend and investment statistics in devolved countries and regions may not initially sound that inviting. But we have seen just how important it is to people that government statistics clearly tell people what the public sector is up to and how much it affects us. Investments in transport infrastructure, replacing EU spending post-Brexit, student loans – these are all areas that affect people’s lives and those of future generations.
Whilst the UK’s and the devolved countries’ public finance data are regarded as among the world’s most transparent, on occasion those publishing the data can be victims of their own success as there is so much data it can be difficult to see the signals from the noise.
It’s a great time to take considered steps forward in our devolved public finance statistics.
New fiscal frameworks in Scotland and Wales present new challenges to communicate transparently to different audiences, mindful of the sensitive nature of the topic matter. Those producing both statistics and other financial data are very receptive to presenting their data in ways that are more meaningful to citizens against the priorities in the respective countries. Producing statistics in this space is more than churning out data -it’s a contact sport where the engagement with different communities is crucial to gaining trust and moving public discourse from method to meaning. The timescales for this are medium term at least so official bodies need to step up engagement beyond government policy users to a wider range of potential users in think tanks, academia, voluntary bodies, fiscal analysts, offices for data analytics and the media.
Minimising harms, championing high standards.
People need to be able to use statistics with confidence, probably even more so when the topic area of the statistics stirs up strong views. Policy makers and users outside Government need reliable information so that their policy decisions are sound. Citizens increasingly expect to ‘see themselves in the statistics’ and have confidence that the statistics describing their experience of society are produced in a trustworthy way. But these ambitions are not always fulfilled. The public value of statistics can be harmed – for example through lack of insights arising from increasing volumes of data and poor coherence between data from different sources leading to confusion. Value can also be undermined through misuse. Our role in the Office for Statistics Regulation (OSR) as regulator of government statistics is to minimize these harms. By minimizing harms, and championing high standards, we uphold public confidence in statistics that serve the public good.
Devolved public finances – a case of don’t judge the book by the cover.
People in the UK’s devolved countries and in English regions interested in economic development can become quite animated by decisions around spending and taxation relating to their country or their region. Here are some examples:
- “The Treasury swallows up our pocket money, and when reluctantly it passes on part of it we [the people of Wales] are told to be grateful for such generosity” – ‘The Welsh Budget’, Phil Williams, 1998
- “Northern Ireland is officially one of UK’s costliest regions as fiscal deficit hits £9bn…Treasury bemused as Stormont continues to spend beyond its means…” – Belfast Telegraph, 2014
- “The 2017 GERS report should be published shortly..stand by for the incoming GERS denial as the SNP and Snats go into a frenzy attempting to explain away the deficit and create fantasies why Barnett doesn’t matter” UK Union Voice blog, August 2017
- Devolved public finances data gives rise to vigorous debate not only in UK countries and regions for example, economic considerations are thought of as playing a central role in the case for Catalan independence.
Why are devolved public finance statistics attract important to people?
People can be distrustful that the government of the day won’t try to hide uncomfortable data. Their awareness of this has been heightened by not only private sector accounting scandals but by the many news stories about off-book accounting and what liabilities the public sector has.
Constitutional change is a live topic in some of the UK’s devolved countries where funding and spending statistics often get used to further the arguments for or against change. The nature of public discourse can be about the source data and the methods used to calculate statistics. Apportionment of spending and revenues raised, are sometimes described as arbitrary. The terms used to describe a country’s or region’s financial position (‘fiscal surpluses’ and ‘fiscal deficits)’ can sometimes hook defensive headlines and rebuttals.
What issues did our work highlight?
People see evidence of not only significant differences between the UK’s countries and regions, but sometimes growing divergence. The Northern Powerhouse initiative underscores the need to address the needs of all parts of the UK according to their needs. Funding and fairness represent one of the liveliest debates in public discourse. So far from a dry topic, devolved public finance statistics are worthy of our attention and investment in improvement.
Statisticians understandably need to tread a careful path.
Even very carefully prepared devolved public finance statistics can generate volumes of parliamentary and assembly questions. Possibly as partially due to the difficulties of treading the careful line, we found that statistics around devolved tax and spend are data-heavy. Statistical commentary focuses mainly around changes to methods or data. Insight is left to external information-brokers in think tanks and academic institutions.
Moving public discourse forward.
The public at large can’t assess whether Northern Ireland’s £9bn ‘deficit’ is good, bad or indifferent. The term ‘deficit’ is value-laden. What would be useful to know is the sources and applications of funds, with the application of funds going beyond current spending and examining the assets and liabilities of the UK’s countries in proportion to their respective GDP. We urge that consideration be given to moving to presentations of these statistics which encourage discussions about sustainable funding and spending against needs rather than deficits and surpluses.
Might we learn lessons from other areas of statistics?
Public concern over hospital patient safety has moved crude hospital death statistics to sophisticated methods of calculating and presenting standardised hospital mortality data. Different hospitals face different circumstances which are accounted for in periodically comparing actual hospital deaths to the number of expected deaths. The resulting ratio contains valuable information. Might moving devolved public finance reporting to also reporting on a standardised basis assist in our understanding of the efficiency of the fiscal transfers between different parts of the UK to meet the significantly different needs of the various countries and regions?
The statistics are now more-worthy of people’s trust.
It’s difficult to move some public debates beyond arguments about the measurement methods to the interpretation of the data. There are trust issues to overcome first. For many years after the first publication of the Government Expenditure and Revenue Scotland (GERS) data, as in Northern Ireland, a lot of discussion after publication of the statistics arose from suspicions over the methods used to calculate the figures. In 2018 more than 10 years since the first GERS publication, a whole-page spread in one of Scotland’s national daily newspapers was given over to discussing the figures and what they meant.
Building trustworthiness through engagement leads to developing new dissemination channels and greater insights.
Out of this work we recommend that, as statistics producers build the trustworthiness of the statistics, they focus on developing the public value of the statistics by thinking about how useful insights based on the statistics can be disseminated. They might, for example, engage with analytical bodies who could publish think pieces using the devolved public finance data. This could attract debate and discussion around topics related to devolved public finances. We recommend for example that statistics producers consider new platforms for disseminating and discussing the public finance data, inviting methodological challenge, encouraging new uses and marrying up the data so there is a consistency between statistical data and budget data.
We have been encouraged by the innovation that we are seeing particularly in presenting budget information and how funds are being spent. We wish all those producing these statistics well in rising to the challenges of reaching the next milestones.