Why do we forecast?Ludi Simpson, University of Manchester, 21/11/2014

“The survey reveals widespread and growing interest in demographic prospects, particularly strong in the Health Service and Local Government. Only a minority of users looked very far ahead. “While customers are on the whole satisfied with official projections, the need for better local projections was a recurrent theme. Information on internal migration, and variant assumptions about its course were in strong demand, as were better and more up-to-date baseline data on the present.“Improved methodology for local projections and training in it is called for.”

Summary

• 3 case studies• “Predict what you cannot control, plan what is

under your control”

– Which plans need forecasts?– What is it about population that is not under the

planner’s control?– Planning scenarios – what is possible?– How to deal with intrinsic uncertainty in the

prediction?

Case Study: National Parks in Britain • Zero total net migration, but young adults replaced by older

families

Cairngorms National Park

Peak District National Park

(Source: Marshall and Simpson, 2009)

Peak District National Park• A reduced and elderly population, fewer of working age,

requiring more housing,

Case Study: South East WalesWelsh government 2011-based population projections

• Greater growth • National centre Cardiff

attracts from de-industrialised valleys

Case Study: South East Wales

• OAN is based on satisfying the continuation of recent trends

• Alternative scenarios envisage more balanced development

Welsh government 2011-based household projections with variant population assumptions - Cardiff

Case study: Birmingham ethnic composition

• Population change 2001-2026

-100%

0%

100%

200%

300%

400%

500%

600%

700%

(e) Constraint to ONS total

(d) Migration overseas

(c) Migration within the UK

(b) Fertility Impact

(a) Age momentum

• Change can be decomposed into each component

• A young age structure has intrinsic momentum for increase

• Increasing ethnic diversity outside the control of planners

Source: BCC report 2006

“Predict what you cannot control, plan what is under your control” RJS Baker

• Why do we forecast?– Which plans need forecasts?– What is it about population that is not under the

planner’s control?– Planning scenarios – what is possible?– What if the prediction is uncertain?

Which plans need forecasts? (source: Joshi and Diamond, 1990)

% of sector using forecasts for each reason (column=100%)

Central govt

Local Govt

Health Consult/ Market Res

Private

Recruitment/ personnel 33 22 33 18 60Marketing 11 14 6 47 52Investment 17 15 10 24 31Location 11 19 27 41 38Transport 28 63 2 53 6Planning 56 97 59 65 2Housing 28 78 4 41 10Education 22 73 0 18 10Welfare/Health 28 71 100 18 4Elderly 39 75 41 6 4Children 33 75 41 12 2Research 39 54 51 53 21Teaching 6 10 14 6 2Other uses 44 31 20 29 8

What is it about population that is not under the (local) planner’s control, and therefore should be predicted?

• Fertility and mortality? – Almost always considered not locally plannable– Therefore a ‘trend’, or ‘business as usual’ projection is used as a

prediction, informed by expected long-term national trend– Usually predicted locally by applying trends from national projection– The official projection is usually used– Occasionally local data establish the recent experience

• International migration?– Debatable influence of planners at national scale– Taken as not under planners’ control at local scale (?)– The official projection is usually used: ‘trend’, or ‘business as usual’

Can planners control internal migration (within UK)?

• National town planning policy assumes that internal migration is affected by the local strategic plan– Extra (or restricted) housing brings extra (or fewer) residents– Extra (or restricted) jobs bring extra (or fewer) residents

• For other planners (adult care, schools, youth service, store location, recruitment and personnel, ...), internal migration is not under their influence– Accept the ‘business as usual’ projection– Or the local plan once adopted

• For the projectionist, a tale of many guvnors– Scenarios, projections, forecasts, predictions

Planning scenarios – what is possible?

• Extra (or restricted) housing brings extra (or fewer) residents– How many extra or fewer residents? – Answer not provided by the official projections (“business-as-usual”)– Software provides answers (POPGROUP, Chelmer, ...)

• How do households translate into need for housing?– Vacant housing, second or holiday homes

• How does the labour force translate into filling jobs– Commuting, unemployment

• Migration flows are adjusted to fill the extra housing or jobs

www.ccsr.ac.uk/popgroup

Current National Planning Framework Policy (NPPF)

• Objectively assessed housing need– Based on the official projection of population and

households (trend, business as usual) • updated with the most recent demographic information

– Various possible upward adjustments (See PAS June 2014)• Suppressed housing supply in past; special circumstances;

expected jobs development• Disputed at examinations

Current National Planning Framework Policy (NPPF)... continued

• Housing targets– Planning adjustments to Objectively Assessed Housing Need

• To achieve national policies such as Green Belt, environmental protection and local aspirational additional jobs growth

• To achieve local policies that may increase housing provision

– All downward adjustments must be compensated for in other (usually neighbouring) districts• Duty to co-operate• “At the heart of the National Planning Policy Framework is a

presumption in favour of sustainable development, which should be seen as a golden thread running through both plan-making and decision-taking”

What if the prediction is uncertain?

• The prediction is intrinsically uncertain• SNPP average error measured against 2006 MYE:

ONS 2008 Subnational population projections accuracy report

• For LAs, average error about 0.5% per year of projection• But it does not show the error for different sizes and

characteristics of LA

Years ahead projected: 2 2 3 6 8 10

Recommendation to local projectionists: sensitivity test for plausible uncertainty

• Penultimate extreme values from past decade– Fertility– Mortality– Migration within UK– Migration with overseas

• Other plausible alternatives to the prediction– ONS high and low fertility and mortality variants– Migration from early 2000s

ONS 2010-based NPP, publication on variants (2012)

ONS 2012-based NPP: variants

Dealing with uncertainty

• Policy managers won’t like you• Cost analysis of errors

– Over-projections and under-projections have different costs• Wasted idle resources vs poorer quality of provision

– These costs may be assessed differently by different people• School staff vs educational finance officer• Developer vs resident vs planner

– Political assessment of costs is necessary

• The point of considering uncertainty is to affect a plan– Weigh costs of over- and under-projection: affect the plan– Contingency plans for alternative plausible predictions

Summary

• Many different planners require demographic projections– Dissemination to suit many guvnors

• Some things not under the planner’s control – Predict the firm trends that all plans need to cater to– Measure the prediction’s uncertainty and declare it

• Planners have responsibility– To plan– To cope with uncertainty

So what?

• What could help? (collaboration/ government statistics offices/ LGA etc / LARIA / University research)– Databank of indicators– Projection scenarios– Accuracy studies– Training in demographic modelling

• Authoritative research on key debates– An end to ever-smaller households: a new long-term trend or

a short pause?– OAN and housing plans: creating a common language– Unattributable Population Change: monitoring the 2010s