The ONS has unveiled its latest set of plans to further develop and transform the national accounts, including GDP. Rob Kent-Smith writes about the challenges of delivering our transformative agenda.
In the last few years we’ve introduced significant changes to the way we produce GDP, including introducing a new framework – utilising international best practice – as well as new surveys telling us about the costs facing businesses and the outputs of the service sector. In addition, by introducing new data sources, such as VAT returns, we’ve been able to introduce quarterly regional GDP, which is produced much quicker than the previous annual estimates.
As was hoped, the new framework has helped us identify which of our sources needs further development work. Over the next two years we plan on introducing improvements to our prices data, which allows us to better remove the effects of inflation on GDP. We will be giving more details of these throughout the year, but one area already identified for improvement is the telecoms sector, where significant technological change over the last decade has had a big impact on the quality of the services offered.
These new deflators, alongside other improvements such as better use of the price information we already have, will allow us to introduce our first estimates of so-called ‘double deflated’ estimates of GDP. Double deflation means we will, for the first time, separately account for price movements in the goods and services being produced in the economy and those used as part of the production process.
Initially, these estimates will be experimental and published alongside headline GDP, but from the 2021 Blue Book we plan to calculate our main estimates of GDP using double deflation.
As well as improvements to prices, we’ll also be making various improvements to keep our figures internationally comparable. While the UK has just left the European Union, it’s still important that our figures meet international standards and remain comparable with our trading partners. In addition, as part of the Withdrawal agreement, there is need for UK GNI figures (which stands for Gross National Income and is a similar measure to GDP) to remain comparable with those of the EU until the EU budgets are finalised for the years in which we were members.
More information about our plans can be found here
While much work remains to be done, we have made good progress in recent years and are confident that we will be able to deliver truly world-leading GDP in the coming years.