UK economic data problems could spread, warns lawmaker

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Devastating gaps in the UK’s employment system could create more problems for the country’s statistics, a senior lawyer has warned, saying economic policymakers are “blindsided” by the mistakes.

Dame Meg Hillier, chair of the Treasury committee, said she and her fellow MPs were “horrified” and “distressed”. letter last month from the UK’s chief statistician said it could be 2027 before a new Labor Review is ready.

He drew comparisons with other government agencies, such as the Bank of England, as he warned of the negative effects of underinvestment in infrastructure.

“It really hits me between the eyes (as) something that is a big problem,” Hillier said in an interview with the Financial Times. “If there is a data gap here, what other gaps might there be? What would be the implications of that for forecasting?

A review of former US Federal Reserve chairman Ben Bernanke last year hit the BoE for “low material investment” in its forecasting tools, with “temporary adjustments” that create a “complex and unmanageable system”.

Hillier said the problem of employee data Office for National Statistics it was not “just one issue”.

“If we do this with a labor market analysis, there will be other areas that we should probably look at,” he said. “Bernanke took some of it from the Bank (of England).”

An internal review of the ONS last month found its failure to produce reliable employment data was due to low investment management and issues related to internal policy and culture. The continuing “uncertainty” in data based on the old jobs survey will take time to improve, leaving policymakers and economists without a clear picture of the UK jobs market.

Senior officials including Andrew Bailey, governor of the BoE, have warned that gaps in UK jobs data make it difficult to set monetary policy. Bailey underlined his frustration in his Mansion House speech in November, warning that it was a “big problem – not just for monetary policy – when we don’t know how many people are participating in the economy”.

The ONS has been working over the past year to increase the number of respondents to the survey – the main source of information on the state of the UK labor market. A dive into the reaction rate during this epidemic forced it first to stop information based on employees, and then put it as “development statistics”.

Hillier said the Treasury committee might call on Sir Ian Diamond, the national statistician who oversees the ONS, to attend. discuss the situation. He said: “We were very surprised by the letter saying, ‘we won’t fix this issue until 2027’.

In his letter to the Treasury committee, Diamond said he would not set a firm timetable for switching to a “modified” labor force survey (TLFS), although he added that his “desire” was and 2026 not 2027.

Although MPs want to question Diamond, Hillier said “beating him in front of people is not who we are, and how we find a solution now – because this will be a big problem”.

The crisis was making it more difficult to assess issues such as the UK’s stagnant growth, he said. “Policymakers are blind and this is causing real problems – we have productivity challenges (and) we don’t understand what’s going on.”

There have been widespread questions over public institutions and their ability to modernize their systems because of the financial crisis, he said.

In his letter, Diamond, who is the chief executive of the UK Statistics Authority, spoke of “flat primary income, damaged budgets, and significant inflationary effects” after the review of the end of the Conservative government’s spending in 2021.

“Working within our budget in these circumstances has led to difficult prioritization decisions and the need to deliver efficiencies and cost savings across the organization,” he wrote.

Hillier said: “You’ve seen this with other authorities and other agencies outside the sector – they’re being asked to do more, not being given the money to do it.”