National Accounts and Related Statistics Work Plan

2013/14 – 2017/18 Section 1: Introduction 1. The purpose of this work plan is:

• to provide users and staff with visibility of the priorities for National Accounts production and development over the next five years;

• to establish a baseline for internal and external users to assess progress; and • to provide a mechanism to prioritise emerging new issues.

2. The plan covers National Accounts and the associated outputs that have a close link, listed in annex A, and

hereafter collectively known as ‘National Accounts’. These outputs are the means by which the UK meets its obligations under the European regulations listed in annex B. The plan has been put together assuming the current planned level of resources allocated to the relevant outputs, projects and programmes. The plan will be reviewed each year but in addition the plan will be sufficiently flexible to respond quickly to emerging issues. However, as the plan demonstrates, there is a significant development programme planned for these outputs over the next five years and whether there is the capacity to manage a bigger change programme, even if extra resources were made available, is questionable.

Section 2: Office for National Statistics (ONS) and National Accounts Strategic Aims 3. This is the first long-term plan for National Accounts since the posts producing most of these outputs were

relocated from London to Newport over the period 2008-2011. The timing of this plan is particularly appropriate as ONS published its strategy for 2013-2023 on 26 March 2013. That strategy states the ONS mission as:

• Trusted Statistics – Understanding the UK

and its vision as:

• To be widely respected for informing debate and improving decision making through high quality,

easy to use statistics and analyses on the UK’s economy and society. 4. To help achieve the vision, there are the following nine strategic aims that are designed to guide ONS

business planning and prioritisation decisions:

• Inform debate and have greater impact on decision making. • Dramatically improve the communication of our statistics and analyses. • Be highly regarded by our customers for producing trustworthy statistics and analyses that

anticipate their needs. • Be at the forefront of integrating and exploiting data from multiple sources. • Have flexible and efficient processes and systems for statistical production, underpinned by

sound methodology. • Improve quality and minimise the risk of errors. • Keep the data we hold secure. • Be a statistical powerhouse at the heart of the Government Statistical Service and the European

Statistical System. • Have skilled and motivated people who are enthusiastic for change.

5. To make these strategic aims more practical in the context of National Accounts, the following strategic aims have been developed for National Accounts for the next five years:

• Produce our regular outputs in line with the pre-announced timetable and free from the need for major corrections.

• Improve the presentation of our numbers, both through improved statistical commentary and using the latest dissemination techniques.

• Improve the quality of our processes and outputs, in part by adopting Lean Six Sigma techniques • Consult with our users about what is important to them both in the regular production of our

statistics and our developments. • Plan our work in line with a five-year plan for National Accounts and Related Outputs that

provides users with a clear road map of when improvements might be seen and is a basis for further discussions about priorities.

• Focus our development resource on delivering the major changes required by European Legislation (European System of Accounts 10 and Balance of Payments and International Investment Position Manual version 6).

• Identify other improvements that can be made to our statistics and prioritise these within the resources that have been allocated in consultation with our users.

• Ensure full compliance with our international legislative requirements, in part by adopting appropriate interim solutions to address possible non-compliance issues.

• Actively contribute to and seek opportunities to influence international discussion on all relevant topics.

• Ensure that staff receive the relevant training they need to do their job well. • When planning our work take into account the impact on the 'work-life balance' of our staff.

6. Annex C provides the link between the National Accounts strategic aims and those for ONS and provides a

way of demonstrating how planned National Accounts developments contribute to the overall ONS roadmap of moving towards achieving its vision.

Section 3: Looking Back 7. ONS has many achievements to its name in the (broadly defined) National Accounts area in the last few

years. These achievements have been achieved against a background of increasing user demands across the range of outputs, the steady reduction in total ONS resources in general, and National Accounts resources in particular, the need to invest in new methods and systems simply to allow continued production of ever more sophisticated outputs, and the sheer complexity of measuring the scale of a rapidly changing UK economy, including the shift towards harder-to-measure services activities and the growth of inter-linkages in a globalising world.

8. Despite these formidable challenges, ONS has made substantial progress towards its goals, and can point

to a solid track record of achievement. A summary follows with more detail included in annex D: • Blue Book 2011 introduced the new Standard Industrial Classification (SIC)(2007) and the new

Classification of Products by Activity (2008). • Blue Book 2011 switched from Retail Price Index (RPI)-based to Consumer Price Index (CPI)-based

deflators for certain categories of households’ final consumption expenditure, a substantial conceptual improvement to methodology and part of the move to a consistent use of price information across the national accounts.

• Input-output tables were published for 2005 on a SIC2003 basis in July 2011, the first such tables since those for 1995 were published in 2002.

• Blue Book 2012 incorporated new methodology and data sources for the measurement of the insurance industry implemented in line with Gross National Product (GNP) and Gross National Income (GNI) reservations. The formal process to lift the reservations should be completed during 2013.

• Successful accreditation as National Statistics for all of the outputs following assessment by the UK Statistics Authority.

• Improved communication and engagement with key users, to an extent that has been readily acknowledged by stakeholders.

• Relocation of staff and production from London to Newport was completed on schedule in March 2011.

• Blue Book 2011 was the first to be produced on the new integrated IT platform, although some systems are not yet deployed pending further development work. Some of these systems will be used in Blue Book 2013, and others will follow in subsequent Blue Books.

Section 4: The Next Five Years: Summary 9. The next five years will see the implementation of a number of new regulatory requirements driven by

international standards. From September 2014, the UK has to produce its National Accounts according to the concepts and definitions in the ‘European System of Accounts 2010’ (ESA10) which is the European Union equivalent of the United Nations' System of National Accounts (SNA08). Similarly, Balance of Payments statistics are required to be produced using the International Monetary Fund’s ‘Balance of Payments and International Investment Position Manual 6’ (BPM6). This change in the framework of the accounts happens around every 15 years to ensure consistent treatment across countries of new and emerging transactions in the economy. This creates a considerable volume of work in order to ensure that:

• sources are amended where necessary to collect any additional or different information required

by the new frameworks, • methods are adopted to create a time series of data on the new basis, • systems are adapted to support the new structures, • users are informed of the upcoming changes so they can make the necessary preparations, • following publication, revisions to the outputs can be clearly explained, and • methodological guidance on how the accounts are compiled is updated to reflect the new

framework.

10. However, not all of this change will be implemented in 2014. The UK has sought a number of ‘derogations’, or permission to delay producing some of the additional detail required by the ESA10 regulation. These are likely to be granted and so the move to producing the outputs using ESA10 will be staged over a number of years with full implementation in 2017 or 2018. Priority is being given to those changes that impact on the level or composition of ‘Gross National Income’ (closely related to Gross Domestic Product) as this is the basis for calculating one element of Member States’ contributions to the EU budget. Further, the methodological guidance on how GNI is calculated is not required by Eurostat until September 2015. A detailed description of the ESA10/BPM6 programme, including benefits is shown in annex E.

11. An additional complication for the 2014 accounts is that, in common with all other Member States, the UK

has a number of ESA95 ‘reservations’ on its National Accounts for the purpose of finalising the contribution to the EU budget. These are being addressed in Blue Books 2013 and 2014 annual. Specifically, the reservations require ONS to:

• Separately identify minor repairs and maintenance of dwellings by owner occupiers of a kind

typically carried out by owners and classify as intermediate consumption in the production of dwellings. Adjust gross value added and gross operating surplus in dwelling services (for households' imputed rents) accordingly.

• Include the creation of cinematographic film originals in estimates of output and gross fixed capital formation.

• Include a mark-up for net operating surplus in estimates of own account software. • Review the new compilation process of Non-Profit Institutions Serving Households with a view to

improving estimation methods and coverage. • Review methods to ensure exhaustiveness, updating benchmarks and modifying methods where

needed. • Include a mark-up for net operating surplus in the valuation of own-account construction output. • Improvement the estimation of consumption of fixed capital on roads, bridges etc. • Investigate the impact of the use of list prices in the calculation of the household final

consumption expenditure on the purchase of new cars.

12. It should be noted that these reservations apply to the LEVEL of GNI (in current prices – before the effect

of inflation is removed) and in most cases will have little or no impact on the GROWTH of GDP (in real terms – after the effect of inflation is removed). Nonetheless, these outstanding reservations need to be fully addressed on the current definition of the accounts before the move to ESA10.

13. So for the next 18 months in particular, there is a massive work programme planned to deliver work to

remove the ESA95 reservations and the major changes arising from the introduction of ESA10 and BPM6. Many of these changes will be welcomed by all users but there will be some things desired by UK users that will not be part of the ESA10/BPM6 developments. Two particular demands that are not legally required are:

• possible new ways of compiling quarterly GDP growth (arising from compiling Supply and Use

Tables in previous year prices’) and • ‘Flow of Funds’, which is the shorthand for Sector and Financial Accounts that are compiled with

full counterparty information.

Section 5: The Next Five Years: Detailed Work Plan General Business and Usual Activities 14. There are a large number of National Accounts and related statistics outputs produced every year. In

common with all ONS outputs, these are the main public-facing elements of our job and the area most users come into most frequent contact with. It is therefore essential that we continue to strive for excellence in this area by:

• ensuring the range of publications meet user needs, • presenting the statistics in a form so as they are understood by expert and lay users, • making underlying data easily accessible for all users, and • ensuring the production of the statistics is as streamlined as possible to maximise time available

for excellent presentation. 15. The full range of products covered by this work-plan and consultation is at annex A. This is a significant

amount of activity and we want to continually ensure that the range of statistics and publications meet user needs. From our own analysis of user needs and feedback so far, ONS has assessed that there is a case for the following changes to be fully explored and these are the main proposals for change to our range of products:

• Production of monthly output based GDP estimate. With the new construction series becoming

available on a monthly basis seasonally-adjusted from June 2013, we now have a much better basis on which to explore the publication of a monthly output measure of GDP, subject to user demand and whether it is technically possible to improve the timeliness of the Index of Services.

• Reducing the frequency of Economic Position of Households to an annual publication and merging with Consumer Trends to provide a complete overview of trends in household income and expenditure. While we welcome feedback on this proposal, we plan to suspend publication for July 2013 to focus resources on delivery of National Accounts. If there is sufficient demand for ongoing quarterly publication then we will reinstate it.

• We wish to explore the feasibility of expanding the current Business Investment publication to not just include Business Investment but all components of Gross Fixed Capital Consumption. No data will be withdrawn as part of this proposal.

16. It is essential that our statistics are communicated in a way that maximises their public good, for example,

for monitoring and decision-making. We continually strive to improve the commentary in our publications

and over the past year, have made improvements across our statistical releases for example, GDP, Index of Services, Retail sales and Consumer Trends.

17. Over the coming 12 months we wish to put a particular focus on improving the commentary in:

• Public Sector Finance Statistics, and • Maastricht Debt and Deficit Statistics.

18. In addition ONS can add significant value to public debate and understanding through exploration of

issues such as the Productivity Puzzle. Over the coming years, we will continue to play an active role in informing debate on the issues surrounding our statistics.

19. The main point of access for most users of our data is through the ONS website. We will take advantage

of improvements in the corporate infrastructure; in particular we will actively support and promote the move to using a data explorer and to open data.

20. We are continually looking to improve our systems and ensure that the production of our National Accounts is as efficient as possible. While this work does not immediately pay dividends to users of the statistics, in the longer term it is essential as it ensures that as much resource as possible is spent on analysing and understanding the data and improving methodology rather than maintaining antiquated systems in resource intensive ways.

21. Our main platform is called CORD and we have a programme of work to migrate more of our processing to

the CORD system. In this time period we plan to migrate the following systems:

SYSTEM1 TARGET FOR CORD Income & Capital Blue Book 2014 Balance of Payments Geographic BB14 Trade in Services Geographic BB14 Trade in Services BB14 Gross Operating Surplus BB14 Non Profit Institutions serving Households BB14 Capital Stock BB14 Financial Account BB15 Dividends & Interest Matrix BB15 Monetary Financial Institutions BB15 Non-Monetary Financial Institutions BB15

22. While not currently in scope for the CORD migration, we are also looking at making significant improvements to the Government systems to reduce our dependence on spreadsheets. This will be taking place as an incremental programme from 2013-2015.

23. As part of the ONS key accounts strategy, we have effective mechanisms for communicating with the key

users of our statistics. We will build upon these arrangements and ensure that these key users are actively consulted over priorities for future work. This work plan forms an important part of that strategy for the national accounts outputs.

1 Refers to system migration and/or development

24. As part of a wider user engagement strategy, we will: • support, and if necessary establish, a ‘user forum’ for each group of outputs (for example,

National Accounts, Short term Indicators) that promotes discussions with and amongst non-government users by 2014,

• use the Royal Statistical Society’s ‘StatsUserNet’ as one means of communicating with users, • communicate with users via a programme of articles and seminars that address emerging issues, • update this plan each year after a period of consultation.

25. In September 2012, ONS re-launched its commitment to delivering continuous improvements to its

statistical outputs. These developments are required to ensure the UK remains compliant with regulatory requirements and also to meet user expectations to keep our outputs relevant and up to date. A number of projects have been or are being developed as part of this initiative and these will be reported in the relevant sections of the work plan. This forms the core of a highly resource intensive programme that, when delivered, will bring real improvements to the range of outputs.

26. Another key part of our development programme has as its main driver the need to fully comply with

European Regulations. In recent months, Eurostat has established a new process of escalating non-compliance that requires Member States to respond more quickly to such issues. As a response, we will:

• comply with European regulations making use of derogations that are negotiated and fully using

interim solutions to avoid pre-infraction procedures, • address the current GNI reservations by 2014 and other issues raised by Eurostat (‘A points’) by

2015, • provide a revised GNI inventory explaining the methodology used to calculate GNI by 2015, • ensure NA and BoP needs are considered in the development of FRIBS (Framework Regulation on

Integrating Business Statistics), and • implement the recognised standard as the means of transmitting data (SDMX) to Eurostat by

2014.

27. ONS has recently re-launched its programme of National Statistics Quality Reviews and a review of National Accounts is planned to begin in the autumn of 2013 reporting by March 2014. Recommendations from that review will be prioritised and reflected in next year’s update of the work plan. In 2013, the UK Statistics Authority plan to reassess the National Statistics status of National Accounts and Short-term indicators. Another important aspect of quality is the processes that we use to produce our statistics.

28. We will conduct process reviews using ONS corporate techniques to deliver both quality improvements

and deliver efficiencies. (‘Lean Six Sigma’) GDP and Short Term Indicators

29. To date one of the main focuses of our continuous improvement programme has been the ‘GDP

improvement’ project launched in October 2012. As part of this programme, we are undertaking the following reviews which we will then implement:

• a review of the construction survey methodology. • industry reviews, examining the methods of calculating the output in an industry. • methods reviews of Household expenditure.

o A review of the Education sector by the 2014 Blue Book • a review of how the Living Costs and Food survey is used in Household expenditure estimates. • review of methods for direct measures of Government expenditure and output.

o focussing on Health for the 2014 Blue Book • transaction reviews, looking at the methods for individual ‘transaction lines’ in the accounts.

o details of the priorities will be published in a separate article

• a review of the adjustment needed because the business register does not include ‘unregistered’ businesses.

GDP compilation methods 30. For a number of years, ONS has had a vision that the calculation of quarterly GDP growth would be based

on quarterly supply and use tables that were balanced simultaneously at current and previous year prices. Moving towards this vision was however delayed by ‘relocation’ and the implementation of new systems and so we have recently re-examined the vision to determine whether it was still appropriate. The outcome of this review will be published in the summer of 2013 and this will confirm that quarterly supply and use balancing in both current and previous year prices is seen as ‘best practice’, and that ONS will be working towards delivering it. More detail on how this will be achieved is given in the following section.

Supply and Use Tables/Input Output Analytical Tables 31. The Supply and Use (SUT) framework will continue to be the method by which different data sources are

confronted and a single picture of the economy emerges. While the SUT are currently broadly fit for purpose to monitor macroeconomic aggregates at a UK level, in the future, more attention will be paid to explaining the nature of adjustments to source data that are needed to present a balanced picture. This will increase the usefulness of SUT for users with a particular interest in individual industries and products.

32. Supply and Use Tables are compiled from a number of sources of varying frequencies and quality. A key

source is the ‘purchases inquiry’, an irregular survey of businesses, conducted by ONS, that collects information on what products and services are purchased by an industry as part of the production process. ONS plans to reintroduce the purchases inquiry in time to inform the 2018 Blue Book and become fully integrated into the 2019 Blue Book. The survey is expensive and also burdensome to business and has not been conducted since 2004.

33. In the meantime, because the results of the 2004 Purchases Inquiry were produced using the previous

Standard Industrial Classification (SIC2003), ONS will be investigating improvements (interim solutions) that can be introduced for the 2015 Blue Book.

34. Other developments planned in this area are:

• Input-Output analytical tables will be published for the first time on an SIC2007 basis in 2013 for

reference year 2008. This analysis will be repeated for reference year 2010 during 2015 and at five yearly intervals thereafter as legally required.

• Annual SUT at previous year prices are required as part of the move to ESA10 and are planned to be developed by 2018.

35. As mentioned above, ONS has confirmed that it has a long-term plan to calculate quarterly GDP growth

using SUT balanced simultaneously in both current prices and constant prices. It is expected that this would be the basis of the ‘third estimate’ produced as part of the Quarterly National Accounts at the end of the following quarter. In principle, this should reduce ‘late’ revisions to GDP, although it may increase revisions between the preliminary and third estimates.

36. Whether GDP based on quarterly current and previous year prices supply and use tables is seen as an

improvement would critically depend on the quality of the quarterly data sources feeding into the process. If their introduction was not accompanied by a significant improvement in source data, this would highlight current deficiencies in some areas, particularly the income components, intermediate consumption, inventories and deflators more generally. Improvements to source data are not currently funded and moreover, there are, as yet, no plans identifying such improvements. Given the changes to the survey programme planned in the coming years as a result of the ESA10/BPM6 changes, these improvements would not be forthcoming before 2019.

37. However, some work before then is possible. The development of annual SUT at constant prices will give ONS experience of how to do simultaneous previous year and current price balancing and will involve quality assessments of deflators and deflation methods. In addition, we will develop quarterly ‘commodity flow’ analyses that will ensure consistency in both current and constant prices for major ‘difficult’ commodities (for example cars, oil, energy, construction) and aim to publish these commodity flow analyses in 2015. In the same timescale, we will Identify the source improvement needed to support quarterly current and previous year prices SUT with the aim being to produce a costed plan for source improvement by 2016.

Nominal GDP 38. In recent months, there has been considerable increased interest in estimates of ‘nominal GDP’, that is

GDP at current prices before the effects of inflation have been removed. This interest was sparked by speculation over whether nominal GDP should be a formal target for monetary policy. Following the Budget Statement in March 2013, the Monetary Policy Committee (MPC) have been asked to say in August 2013 what role they see nominal GDP having in their future work and ONS will respond to that statement.

39. Even if nominal GDP does not become a formal MPC target, we expect interest in it to continue and it is

unclear whether the current methods for producing it are sufficient. We therefore plan to investigate improvements to current processes that will improve the quality of nominal GDP. The particular focus will be to consider whether we can publish an estimate of nominal GDP alongside the preliminary estimate of GDP – currently the first estimate of nominal GDP appears in the bulletin ‘Second estimate of GDP’. In addition, the methodology used to construct the quarterly path of nominal GDP from the balanced annual SUT will be reviewed.

Revisions to GDP 40. In the last two and a half years, GDP has been broadly flat, up a little in some quarters and down a little in

others. This profile has thrown more of a spotlight on the extent to which estimates of GDP growth are revised. ONS’s role in this debate is to provide the information that users need to judge the likely extent of future revisions and we do this by providing an online real time database on the ONS website. In the light of increased interest in nominal GDP highlighted above, this database has been extended to cover revisions to nominal GDP as well as real GDP and will be further developed to include revisions to expenditure and income components, so that users can assess the quality of individual component series.

41. Part of the public debate surrounds the extent to which revisions occur a long time after the event. The

way that GDP is compiled means that data continue to be received for up to two years after the year in question. After that time, revisions are largely caused by either methodological improvements introduced by ONS or by changes to the European framework or classification system. We are examining the feasibility of identifying the extent of revisions due to these methodological changes so that users can judge whether future revisions are likely to be of a similar scale.

Historic data

42. Since 1998, when the 1995 European System of Accounts was introduced and particularly in 2011, when

the SIC2007 was introduced, it has been difficult to the preserve detailed long-run consistent historic time series (that is, pre-1997). For GDP components we have previously published a strategy that concentrated on a ‘core dataset’ which has been published back to 1948 for annual data and 1955 for quarterly. Users have responded by requesting more detail and to meet that need we will be publishing more detailed components of Household Final consumption expenditure and Gross Fixed Capital Formation during 2014.

43. Potentially the introduction of ESA10 in 2014 brings more problems but we recognise that historic data is

of key importance to users. Therefore, we plan to publish historic ESA10 compliant data alongside Blue Book 2014 and are developing methods and systems to allow that to happen.

Sector and Financial Accounts

44. This section of the work plan covers the presentation of a comprehensive set of accounts for each sector

of the UK economy. The two main publications are the UK Economic Accounts (quarterly) and the UK National Accounts (or Blue Book, annually). Historically, there has been less user interest in the SFA than in GDP, but this has increased since 2008 as the quality and range of information available did not enable effective monitoring of the financial crisis. The major improvements to the sector and financial accounts over the next five years will come via the full implementation of ESA10. Several improvements to the structure of the accounts are planned by 2017 or 2018 including the introduction of a revaluation account and ‘other changes in volume’ account.

45. ESA10 also brings an increase in the number of sub-sectors in the economy for which full accounts are

required. These will also be introduced by 2017 and include the following legally required changes: • Separation of ‘Non-Profit Institutions serving Households’ from ‘Households’ sector. • Identification of ‘State Government’ sector. • Identification of ‘Social Security Fund’ sector. • New sub-sectors for the Financial Corporations sector.

46. In line with international guidance the main UK financial accounts are generally ‘unconsolidated’, that is they include holdings of and transactions in assets and liabilities even when the units are in the same sector. There is a requirement to produce ‘consolidated’ accounts which exclude these units. This is currently met in the UK with largely modelled data. Also by 2017, we need to introduce a ‘full solution’ for the consolidated accounts to replace this.

47. Completing the work required to meet ESA10 changes is an essential pre-requisite to meeting the user

requirement known as ‘Flow of Funds’. The term can mean different things to different users but in this context, we use it to mean the availability of full counterparty information in the financial accounts – that is, for the assets of each sector, we know the sector that has the counterparty liability (and vice versa). To do this properly requires additional data collection which is planned for 2018 with full Flow of Funds data planned for 2019.

48. Before then, work will focus on planning for this additional data collection, and making sure that the

necessary ESA10 building blocks are in place. In addition, we will be examining whether modelled estimates can be improved by making more use of data that is already being collected. We will also explore whether there are any other ‘quick wins’ that can be implemented.

Other international 49. There are a number of international initiatives that have arisen following the financial crisis and have

similar aims. In particular, Eurostat has developed the Macroeconomic Imbalance Procedures Scoreboard (MIPS), the International Monetary Fund have developed their Special Data Dissemination Standards Plus (SDDS+) and the G20 have initiated their data gaps project. These initiatives are very similar in nature and require the transmission of a range of indicators, many of which are compiled from the SFA or need full Flow of Funds data. We will fully comply with any of these initiatives that are legally required (MIPS). For others, we will work with the international agencies and ensure that these initiatives benefit from other planned improvements but at this stage we cannot commit to providing SDDS+ information to the IMF. We will however produce a plan by 2016 setting out how we can become compliant.

Historic data 50. Since the introduction of ESA95 in 1998, the full detail of SFA components has been available only back to

1987. We are working with academic partners with the aim of restoring consistent time series with the level of detail that was available in the 1997 Blue Book but reflecting subsequent methodological changes. We are currently examining the scope of what is wanted and what can be achieved with the aim of publishing in 2014 on an ESA95 basis and in 2015 on an ESA10 basis.

Balance of Payments and Trade 51. The major changes to Balance of Payments (BoP) and Trade will come from compliance with ESA10 and

BPM6. For example, the adoption of the Framework for Direct Investment Relationships, the introduction of an asset/liability and extended directional principal, and the introduction of a CORD geography system. In addition to this, the transmission of monthly BoP will become a regulatory requirement in 2014 and responsibility will pass from the Bank of England to ONS.

52. New emerging issues include the international development of global value chain research and at the

European and national level increased interest in the digital economy. In response to this, we plan to look at options to improve the measurement of imports of services directly to households. In addition to this there is already increasing pressure from Europe to provide additional information over and above BPM6 requirements.

53. Changes arising from introduction of BPM6 and assuming responsibility for monthly BoP will consume all

of the development resource for this team until 2015.

Public Sector Finance Statistics 54. The Public Sector Finance Statistics have increased in profile as scrutiny on debt and deficit reduction has

grown. The ONS publishes two main statistical bulletins on this:

• Public Sector Finance Statistics (monthly). • Government Debt and Deficit Under the Maastricht Treaty (Statistical Bulletin published twice a

year with tables published quarterly). 55. All publications on the Public Sector Finances are aligned with National Accounts concepts (and hence

with International guidance) so that when a body is classified into National Accounts, the classification flows through into statistics on Public Sector Finances. Currently this is based on a European System of Accounts 1995 basis and the Manual on Measuring Government Deficit and Debt.

Aligning Public sector Finances and National Accounts and Blue Book 13 changes 56. Public Sector Finance Statistics has an open revisions policy (changes to methodology and data can be

taken on whenever they are ready to be implemented) whereas National Accounts has an annual process for agreeing changes to historic series. Due to other priorities, Blue Books 2011 and 2012 did not contain any revisions to the National Accounts relating to classification changes. This means that there have been increasing differences between the National Accounts and the Public Sector Finances over the past few years.

57. Blue Book 2013 will bring the Public Sector Finance Statistics and National Accounts in line as far as is

possible within the timescales for the production of National Accounts. In general this means that unless both classification decisions and the revised data were received by the end of December 2012, then Blue Book 2013 will not contain the new classification. The major example of this is the reclassification of Northern Rock Asset Management and Bradford and Bingley to Central Government which was implemented in Public Sector Finances in February 2013. National Accounts will align to the new classification in the 2014 Blue Book.

58. The alignment in Blue Book 13 will impact upon National Accounts aggregates for Central and Local

Government and Public Corporations. However, there will also be small revisions to the Public Sector Finances. Blue Book 2014 will deal with issues that were unable to be aligned in 2013 plus any new classification decisions that need to be implemented to ensure ongoing alignment.

59. We will also take steps to ensure that this gap between National Accounts and the Public Sector Finances

does not occur again. Each Blue Book from now on will contain the necessary revisions to bring the

National Accounts and Public sector Finances as far into line as is possible within the constraints of the production schedules for these publications.

60. In addition to these changes there will also be methodological improvements in Blue Book 13 which

impact both on Public Sector Finances and National Accounts

• The data from the Whole of Government Accounts for some 35 of the largest Public Corporations from 2008/9 will replace the existing data source.

• Series for public corporations’ artistic originals (largely relating to BBC and Channel 4) and capitalised computer software have been revised back to 1997. These affect the calculation of both gross operating surplus and gross fixed capital formation. The effect is largely neutral in terms of the borrowing requirement but alters the balance between current and capital accounts.

• A revised treatment to include police and fire service pension top-up grants within local authority final consumption has been taken into the most recent PSF releases from 2007/8. It will now be taken into the Blue Book and PSF for all years from 2006/7, when top-up grants started.

Developments to meet new International protocols

61. There are major International Directives that will impact on the Public Sector Finances and Government

Sector Statistics over the coming years: • The “6-pack” agreement2

• The move to European System of Accounts 2010 basis and the new Manual on Government Debt and Deficit which will be aligned with ESA 10.

62. These Regulations and Directive will, from 2014, bring in European requirements to publish more data on:

• government contingent liabilities with potentially large impacts on public budgets and other

indicators (including government guarantees, non-performing loans, value of public private partnerships where the capital asset is not recorded on the government balance sheet and liabilities as the result of government participation in the capital of corporations), and

• local government expenditure and revenue on a quarterly basis. 63. These new requirements will be implemented within, or published alongside, the Public Sector Finance

statistical bulletins. Before finalising the details on our approach to the implementation of this Directive, we will consult with users about what and how we will be publishing.

ESA10 64. As already noted, National Accounts and its related statistics are being updated to be published on a basis

that is consistent with European System of Accounts 2010 and the 2013 Manual on Measuring Government Deficit and Debt which is expected to be published in Autumn 2013.

65. There is a considerable amount of work to be undertaken to ensure both National Accounts and the Public

Sector Finance Statistics are able to be published from September 2014 on a basis that is consistent with ESA10.

2 6 pack agreement: consisting of European Regulations 1173/2011 to 1177/2011 and European Directive 2011/85/EU

66. The changes in line with ESA10 will be introduced in both the National Accounts and the Public Sector Finance Statistics over a five year period with the first stage of full implementation in September 2014.

Under ESA10 there are some important changes in the way that non-financial assets are treated and classified, for example decommissioning costs on large capital assets (for example, nuclear power stations) are included as an asset and improved land is recognised as a separate asset for the first time. The most important changes for public sector accounts are however the capitalisation of research and development and capitalisation of weapons systems:

• The capitalisation of Research and Development spending o Under ESA10, research and development activity (defined as creative work undertaken

on a systematic basis in order to increase the stock of knowledge) is required to be capitalised for the first time. Research and development by government units is non market production and will therefore be valued on the basis of total costs incurred.

• The treatment of non-financial assets o Under ESA10, military weapons systems comprising vehicles and other equipment such

as warships, submarines, and tanks used continuously in the production of defence services are classified as fixed assets. Single use items, such as missiles, rockets and bombs delivered by weapons or weapons systems are generally treated as military inventories. This is a change in treatment from ESA95 where spending on military equipment was not capitalised except where there was an established dual civilian use.

67. While the first submission of data to Europe is in September 2014, we appreciate that changing the basis

of the Public Sector Finance Statistics midway through the financial year is unhelpful. We are committed to providing as much information as possible to users to help manage the changeover. We are examining the ability to:

• produce an initial estimate of impact in early 2014 so users can understand the changes and the impacts on Public Sector Finance Statistics, and

• produce shadow measures of the key Public Sector Finance aggregates from the publication of Public sector Finance Statistics in June 2014 data to help manage this transition amongst other options. We will consult with users on how we plan to manage this transition.

68. Beyond Blue Book 2014, the key changes being brought in to bring the UK fully compliant with ESA10 are:

• the delineation of the state sector (Scotland, Wales and Northern Ireland) from Blue Book 2017

o This is about splitting out the receipts and expenditure of the Devolved Administrations in Wales, Scotland and Northern Ireland in the National Accounts and Public Sector Finances.

• The delineation of the Social Security Sector from Blue Book 2017 o There are two bodies that could form part of a social security sub-sector in general

government. They are the Great Britain National Insurance Fund and the Northern Ireland National Insurance Fund. However, other countries also consider a wider set of bodies in this sub-sector and so significant further development work will be undertaken to fully define and implement this change.

69. Both of these changes require significant amounts of methodological development which will begin early in 2014 to prepare for these changes.

Other developments

Classifications 70. Classifying bodies according to National Accounts classifications is an ongoing process and while it

generally works well, we are always looking to develop and improve the transparency of the process to respond to feedback. As a result of recent feedback, during 2013, we will be

• implementing new processes for National Accounts classifications which will

o Give a greater transparency of what classifications are being reviewed or are about to be reviewed

o Reduce the time taken from classification decision to implementation. Full details of this will be made available over the summer of 2013.

Accessibility and presentation of statistics Methodology, accessibility and presentation of statistics 71. Public Sector Finances are a complex area of statistics and the bulletin is therefore a difficult bulletin for

non-expert users to follow. In addition, the links between the Maastricht debt and deficit measures and the UK specific measures are split over two publications which has caused problems for some users. As part of our commitment to continuously improve our service to users, during 2013 we plan to review the presentation of these statistics looking at:

• The balance in the bulletin between different measures and how best to present a meaningful

narrative to users on changes in public sector debt and borrowing.

o The bulletin has a number of measures of debt and borrowing and we wish to explore how best to provide a meaningful overview of trends in Public Sector Finances, exploring the need for a headline measure at all and the best possible presentation of the range of information.

• The methodology underpinning the implementation of the ex-measures, their ongoing usefulness to users and how they fit into an overarching presentation of debt and borrowing.

o It is now five years since the ex-measures were introduced and it is important to ensure

that the measures continue to meet user needs and adhere to statistical best practice. We therefore will be exploring:

the ongoing user demand for the ex measures the methodology underpinning the ex-measures under what circumstances would we no longer publish an ‘ex-measure’ and

ensuring that the methodology is robust and fit-for-purpose for how the ex-measure would be unwound.

• The readability and ease of understanding of these key statistics.

• How we inform users and provide meaningful information surrounding one-off factors.

• Increasing the amount of underlying data available to aid analysis of trends in Public Sector Finance Statistics.

Managing Change

72. This is a major period of change for Public Sector Finance Statistics and we wish to ensure that the change is managed in an open and transparent way without frequently revising the statistics. We therefore intend to manage this as a change programme, discussing on an ongoing basis with users how best to meet their needs and manage the necessary changes to the publications.

73. The UK Statistics Authority is currently reviewing the decision surrounding the Asset Purchase Facility. We

will consider the recommendations from the UK Statistics Authority as part of this review.

REGIONAL ECONOMIC STATISTICS (including REGIONAL ACCOUNTS) 74. A number of enhancements to Regional Accounts methodology have been implemented in the last few

years and a full development programme is planned for the coming years, much of which is legally required under ESA10.

75. Development of a new output approach for regional Gross Value Added (GVA(P)) is required under ESA10

to satisfy the requirement for a measure of ‘real’ GVA growth at the Nomenclature of Units for Territorial Statistics (NUTS) level 2 of European regional geography, which is the sub regional level and is used as the basis for funding decisions in Europe. We plan to publish the first full set of experimental results in December 2013, one year ahead of the ESA requirement.

76. Once the new GVA(P) approach is published alongside the existing income-based measure (GVA(I)), we

anticipate a degree of uncertainty among users over which of the two approaches of regional GVA to use. Although conceptually the same, the two approaches will differ to some extent owing to data and methodological differences. We plan to develop a balancing process, based on the process used to balance the three approaches of national GDP, which will provide a single balanced estimate of regional GVA. It is expected that this development will take at least two years.

77. ESA10 will also affect many of the inputs to Regional Accounts, due to changes to data and processes at

the national level. We have plans in place to monitor and assess these so that we are able to timetable any additional changes to Regional Accounts systems and processes required to accommodate the national changes as they are implemented in each successive Blue Book dataset.

78. The ESA10 Regulation also includes one voluntary item at the regional level: regional Household Final

Consumption Expenditure (HFCE). Since it is voluntary this is a lower priority than the mandatory requirements, but it remains an aspiration for Regional Accounts development once the other requirements have been met (post 2015).

79. The next update of European regional geography (NUTS) is due to be implemented on 1 January 2015. This

change will greatly expand the number of distinct areas in London in particular, as well as dividing several other areas with large resident populations. The boundary changes will provide a significant improvement to the level of detailed information available to users of Regional Accounts data, but the scope of the changes will entail a larger than usual development project.

80. In addition to developments in response to European legislation, a number of other developments are

planned to the Regional Accounts outputs. Most significant of these are the removal of smoothing from all estimates in 2013 and the development of independent workplace and residence estimates of regional GVA(I). These two developments are the result of a methodology review and user consultation carried out in 2012. A further user consultation on the results of an impact analysis of the workplace and residence estimates is planned for summer 2013, with the possibility of implementation in December 2013.

81. ONS also compile quarterly output indices for Wales under contract to the Welsh Government. These outputs currently comprise a Welsh Index of Production and Construction, and a Welsh Index of Market Services, and the aim is to be comparable to similar indicators produced for the UK, Scotland and Northern Ireland. We have no current plans to expand or reduce the provision of Welsh indicators, but we maintain regular liaison with Welsh Government and will respond to any changing needs that they identify.

82. We also provide estimates of banks and building societies output to the Scottish Government, for use in

their Scottish quarterly GDP estimates. This data source was established a few years ago with the Bank of England, to provide quarterly estimates for all UK regions and devolved countries at the NUTS1 level. The agreement with Scottish Government ensures that the data used in the Welsh and Scottish indicators are entirely consistent. Further liaison with Scottish Government, and with the Northern Ireland Executive, may result in more areas where we can work together to improve the consistency of regional statistics. Any such developments will be given appropriate priority in our work plans over the coming years.

TRAINING/CAPABILITY 83. In support of this challenging work programme and, following relocation, it is important to increase the

relevant knowledge of all national accounts staff through the provision of appropriate training and learning opportunities. We have developed a programme of National Accounts training, based on a modular approach that will meet this need and will also be used to raise the knowledge of users of national accounts statistics across government.

84. In addition to the normal training programme, it will also be important to develop a number of experts in

national accounts who can contribute to discussions at an international level. This will be essential in the run-up to discussions on the next rewrite of the various international manuals, which will begin in the coming years. This initiative will help to raise the profile of the UK national accounts internationally and to help Influence future European legislation by making positive contributions in task forces and working groups.

Annex A: List of Outputs Covered by the National Accounts Work Plan Monthly Retail Sales Index of Production Index of Services Construction Output UK Trade Public Sector Finances Update of Classifications Quarterly Preliminary Estimate of Gross Domestic Product Second Estimate of Gross Domestic Product Quarterly National Accounts UK Economic Accounts Business Investment UK Balance of Payments UK Profitability Consumer Trends Welsh Index of Production and Construction (for Welsh Government) Welsh Index of Market Services (for Welsh Government) Economic Position of Households Biannual Maastricht Debt and Deficit Annual UK National Accounts (Blue Book) UK Balance of Payments (Pink Book) Input-Output Supply and Use Tables Regional Household Disposable Income Regional Gross Value Added

Annex B: Detail of Eurostat Regulations that this work plan contributes to: The ‘GNI Regulation’: Council Regulation (EC, EURATOM) No 1287/2003 of 15 July 2003 on the harmonisation of gross national income at market prices. The ‘EDP’ Regulation was EC479/2009 which was amended by EC679/2010. A further Communication of relevance is COM2011_211 covering 'Towards Robust Quality Management for European Statistics'. The ‘ESA 1995’ Regulation. Council Regulation (EC) No 2223/96 of 25 June 1996 on the European system of national and regional accounts in the Community. The ‘BPM5’ Regulation covered by (EC) No 184/2005 of the European Parliament and of the Council. The ‘BPM6’ Regulation No 555/2012 – 22 June 2012.

Annex C: ONS and NA Strategic Aims

ONS Strategic Aims National Accounts Strategic Aims Inform debate and have greater impact on decision making

Produce our regular outputs in line with the pre-announced timetable and free from the need for major corrections Focus our development resource on delivering the major changes required by European Legislation (ESA10/BPM6) Identify other improvements that can be made to our statistics and prioritise these within the resources that have been allocated in consultation with our users

Dramatically improve the communication of our statistics and analyses

Improve the presentation of our numbers, both through improved statistical commentary and using the latest dissemination techniques

Be highly regarded by our customers for producing trustworthy statistics and analyses that anticipate their needs

Consult with our users about what is important to them both in the regular production of our statistics and our developments Plan our work in line with a five-year plan for National Accounts and Related Outputs that provides users with a clear road map of when improvements might be seen and is a basis for further discussions about priorities

Be at the forefront of integrating and exploiting data from multiple sources

Be at the forefront of integrating and exploiting National Accounts data from multiple sources

Have flexible and efficient processes and systems for statistical production, underpinned by sound methodology

Have flexible and efficient processes and systems for statistical production, underpinned by sound methodology

Improve quality and minimise the risk of errors Improve the quality of our processes and outputs, in part by adopting Lean Six Sigma techniques

Keep the data we hold secure Keep the data we hold secure Be a statistical powerhouse at the heart of the Government Statistical Service and the European Statistical System

Actively contribute to and seek opportunities to influence international discussion on all relevant topics Ensure full compliance with our international legislative requirements, in part by adopting appropriate interim solutions to address possible non-compliance issues

Have skilled and motivated people who are enthusiastic for change.

Ensure that staff receive the relevant training they need to do their job well When planning our work take into account the impact on the 'work-life balance' of our staff

Annex D: Recent National Accounts Achievements

1. ONS has many achievements to its name in the (broadly defined) National Accounts area in the last few

years. These achievements need to be set against a number of countervailing headwinds, including the steady reduction in total ONS resources in general, and National Accounts resources in particular, the growing domestic and international demands for statistical outputs and validation, the need to invest in new methods and systems simply to allow continued production of ever more sophisticated outputs, and the sheer complexity of measuring the scale of a rapidly changing UK economy, including the shift towards harder-to-measure services activities and the growth of inter-linkages in a globalising world.

2. Despite these formidable challenges, ONS has made substantial progress towards its goals, and can point

to a solid track record of achievement. Introduction of New National Accounts Systems 3. It was recognised a decade ago that in order to continue to deliver robust statistics on the scale of the UK

economy and its sectoral structure and inter-relationships, it would be necessary to invest in new systems and methods. A fundamental rewrite of National Accounts systems was therefore launched. This has delivered some of its key objectives, although there is still some way to go before the full benefits will be realised.

4. Following some early pilot work, Blue Book 2011 was the first to be produced using elements of a new

integrated IT platform, although some systems are not yet being deployed pending further development work. Some of these systems will be used in Blue Book 2013, and others will follow in subsequent Blue Books.

5. The temporary delays to the advancing of national accounts base and reference years, necessary to

provide resources for re-engineering, were restored with a return to standard policy in Blue Book 2011. 6. Work on development of statistical sources and methods has re-started following a decision to reduce

work in this area temporarily in order to provide resources for re-engineering. Most recently ONS announced the resumption of a number of industry reviews for key industries within the services industries.

Relocation 7. In addition, relocation of NA staff and production from London to Newport was completed on schedule in

March 2011, and with minimal disruption to outputs. Blue Book Changes and Other Statistical Outputs 8. Blue Book 2011 incorporated a number of significant statistical improvements, which were welcomed by

users, including:

• The change to a new Standard Industrial Classification - from SIC2003 to SIC2007, an EU legal requirement, and the biggest re-classification since the 1990s.

• The change to a new Classification of Production Activity (CPA2008), also an EU legal requirement. • The switch from RPI-based to CPI-based deflators for certain categories of households’ final

consumption expenditure, a substantial conceptual improvement to methodology and part of the move to a consistent use of price information across the national accounts.

9. Blue Book 2012 incorporated new methodology and data sources for the measurement of the insurance

industry implemented in line with GNP and GNI reservations. The formal process to lift the reservations should be completed during 2013.

10. Input-output tables were published for 2005 on a SIC2003 basis in July 2011, the first such tables since those for 1995 were published in 2002. The systems have been put in place to allow them to be updated on a more regular basis, with an update planned on a SIC2007 basis in summer 2013.

11. ONS is on schedule to deliver further data improvements in Blue Book 2013, including the alignment of public sector data in the national accounts with that already published in the public sector finances releases.

12. A sustainable approach to maintaining a core historic dataset has been realised, which meets the vast

majority of user requirements. Without this, the sheer number of series requiring robust historic datasets would have been impossible to maintain satisfactorily.

13. Not the least of ONS achievements in recent years has been the credible and robust measurement of the

development of the UK economy during a period of great volatility. This has posed enormous challenges to existing methodology as it has been tested by the first recession in the UK for almost 20 years. The scale of GDP revisions has been kept to a modest scale, and ONS has responded to address areas where previous methodologies have proved wanting in a manner that has met user requirements in a pragmatic way wherever possible. A longer term ‘continuous improvement programme’ for GDP estimates and the national accounts has arisen from this episode, and has been widely shared with key stakeholders.

Other achievements

• Successful accreditation as National Statistics for annual and quarterly National Accounts, public

sector finances, and Government deficit and debt statistical bulletins following assessment by the UK Statistics Authority

• A number of GNI and EDP reservations have been removed, and a number of actions from the last

EDP mission successfully handled, including the resolution of a number of high profile classification issues

• Improved presentation and commentary in several statistical bulletins, and the re-design of Consumer Trends to make it more accessible to users

• Improved communication and engagement with key users, to an extent that has been readily acknowledged by stakeholders

• A phased programme of improvements to the Eurostat transmission programme has been agreed and is being implemented

• The introduction of several outputs from the national accounts that are relevant to the Measuring National Well-being programme, including alternative measures to GDP (such as NNI), the economic position of households, human and natural capital estimates, and improvements to the environmental accounts

Annex E: Detail of ESA10/BPM6 Section 1 - Introduction and Background to the ESA10/BPM6 Programme

1. The UK’s National Accounts and Balance of Payments must be produced according to internationally agreed standards enforced by EU legislation. Those standards have been updated. In response, ONS has established a major development and business change programme (namely the ‘ESA10/BPM6 Programme’) to implement the changes necessary to come in line with the new standards. There is a regulatory requirement to implement the improvements in the new versions of the international standards by September 2014

2. To revise the National Accounts and Balance of Payments in line with the new standards requires a major programme of development and business change. The improvements range from collection of new data through changes to existing surveys and research into new sources, changes to IT platforms and business systems, development of new methods, through to changes to the production processes and the published outputs.

3. Due to the considerable extent of the changes and long lead times to collect additional statistics, ONS has requested derogations from Eurostat to delay provision of some detail beyond this date. ONS are proceeding on the assumption that the derogations will be approved and therefore that the last derogation would be cleared in January 2020. ONS should receive final confirmation in Sep/Oct 2013 whether the derogations sought have been approved.

4. Despite seeking derogations for delivery of some detail post September 2014, priority has been given

within the Programme to those changes that affect GNI and these must be delivered within the National Accounts and Balance of Payments in September 2014 (and consistently in the Blue and Pink Books that follow in October 2014).

5. A significant degree of development work has already started and will remain ongoing for the life of this programme, currently expected to extend from now until the financial year 2019/20. Significant resources are required to deliver this challenging programme of work.

6. The relevant updated international standards are:

• United Nations System of National Accounts (SNA) 1993 - the new version is called SNA 2008

• Eurostat European System of Accounts (ESA) 1995 - the new version is called ESA 2010

• International Monetary Fund Balance of Payments Manual (BPM) Version 5 - the new version is called Balance of Payments and International Investment Position Manual Version 6 (BPM6)

• Eurostat Manual on Government Deficit and Debt (MGDD)

7. The standards are subject to the following regulations:

• ESA95 is subject to EU regulation 2223/96 – 25 June 1996.

• ESA10 will be subject to EU regulation later in 2013 (reference is not yet available).

• BPM6 is subject to regulation 555/2012 – 22 June 2012. 8. At a high level the main outputs affected by the revised standards are:

• The (annual) United Kingdom National Accounts: The ‘Blue Book’.

• The (annual) United Kingdom Balance of Payments: The ‘Pink Book’.

• The Quarterly National Accounts (including Quarterly GDP).

• Quarterly and monthly statistics and indicators associated with the National Accounts and Balance of Payments.

• UK Gross National Income (GNI).

Section 2 – Benefits and links with ONS Strategy

9. The international standards have been improved and updated to reflect:

• an extension of the production boundary (that is, production of goods and services);

• the recording of new assets and transactions;

• the rapid expansion of the financial services and financial products;

• the impact of globalisation;

• improved statistics for the measurement of government finances including the treatment of pensions; and

• the development of national balance sheets.

10. Once updated, the UK National Accounts and Balance of Payments should better reflect the current economy and better meet a wide range of UK user and policy needs. For example, greater detail about financial services would improve the data available for assessing this sector.

11. Delivery of the ESA10/BPM6 Programme will also provide clear benefits in line with the ONS strategy, linked to the ONS Strategic Aims and Drivers as follows:

ONS Strategic Drivers ONS Strategic Aims ESA10/BPM6 Programme

Measuring Complexity Inform debate and have greater impact on decision making.

Increased coverage and detail in the Financial Sector. Improved reporting of the contribution:

• of the non-profit sector (NPISH) • of the private non financial sector (PNFC) • of Research and Development

Improvements against the challenge of data collection due to globalisation and filling the data gaps identified from the financial crisis.

Be highly regarded by our customers for producing trustworthy statistics and analyses that anticipate their needs.

We are implementing changes to the way National Accounts are produced according to regulatory requirements (ESA10, BPM6 and MGDD), agreed derogations and plans.

The data ‘buzz’ Have flexible and efficient processes and systems for statistical production, underpinned by sound methodology.

Implementation involves changing methods, systems, data, sources, surveys, documentation, publications and transmissions across all areas of the National Accounts Production processes and ensuring these systems are fit for purpose.

Improve quality and minimise the risk of errors.

We are using Change Packages to deliver recommendations incrementally. Change Packages ensure that all changes are integrated and released into production in a controlled way.

International Be a statistical powerhouse at the heart of Government Statistical Service and the European Statistical System.

We are currently piloting the SDMX transmission software.

Section 3 – Detail of ESA10/BPM6 Programme Deliverables

12. The scope of the Programme has been set for 2014. Priority delivery has been given to those changes from ESA10 and BPM6 that affect Gross National Income (GNI) estimates

13. The main ESA10 changes planned for delivery in Blue and Pink Books 2014 are:

i. Capitalisation of Research and Development ii. Extension of the asset boundary and government gross capital formation to include expenditure

on weapons systems iii. Head office to be allocated to the institutional sector of the majority of its subsidiaries and

improved distinction between Head offices and Holding companies in line with the International System of Industrial Classification

iv. Valuation of output for own final use by households and corporations to include a return on capital

v. Treatment of costs of ownership transfer elaborated vi. Treatment of employee stock options described

vii. Liability in special drawing rights recognised viii. Revised recording of goods sent abroad for processing in line with strict application of change of

ownership basis ix. Revised treatment of goods under merchanting x. Revised classification of Other Current Transfers

xi. Changes in the recording of pensions entitlements xii. Method for calculating FISIM refined

xiii. Output of central banks clarified xiv. Treatment of guarantees elaborated xv. Introduction of the concept of unallocated gold accounts into deposits and monetary gold

xvi. Distinction between different types of other investments income: - Insurance policy holders - Pensions entitlements - Collective investment fund shareholders

14. The main BPM6 changes planned for delivery in Blue and Pink Books 2014 are:

i. Changes to the recording of Foreign Direct Investment and International Trade in Services ii. New concepts on the measurement of international remittances and gambling

iii. Revised treatment of goods sent abroad for processing and goods under merchanting iv. The introduction of the concepts of the reserve-related liabilities, standardised guarantees and

unallocated gold accounts v. More detailed Financial Corporations sub-sectoring and classifications

vi. Geographic expansion vii. Refinement to the recording of trade in gold (strictly speaking BPM5)

15. The ONS has applied for a series of ‘derogations’ that is, to provide detail in later years. The major derogations as they stand (shown by expiry year, not by transmission table) are:

Year Derogation(s) to be cleared 2016 • Back data affecting all component series (not aggregates) and all tables covering the years

1995 and 1996 • Employment data by NUTS II and III breakdown by total economy and A*10 breakdown • Payments for non-market output split by P.131 and P.132 • Symmetric Input-Output Tables

2017 • GFCF - New breakdown by asset (AN_F6) • Breakdown of imports and exports of goods and services into S.2I, S.21, S.22 in current

prices, previous years' prices and chain-linked volumes • Compilation of all the variables underpinning the Production Account and Generation of

Income Account for the year T-1 for transmission at T+9 months • Split of Households and NPISHs into separate sectors S.14 and S.15 respectively

2018 • Separation of S.1312 State Government and S.1314 Social Security Funds (note, this may be reduced to 2017 for Table 6 and 7).

• Balance sheets - only the present missing/new variables and quality of existing variables to be improved,

There are a number of other derogations covering either timeliness or specific variables, for example:

Year Derogation(s) to be cleared 2015 • By industry, persons employed and hours worked required at T+60 days. (from T+90) 2016 • P.31, P.32 and P.41 which is individual consumption expenditure, collective consumption

expenditure and actual individual consumption required at T+2 months in CP, PYPs and CLVs. (from T+3)

• D.21 Taxes on products and D.31 Subsidies on products required at T+2 months in CP, PYPs and CLVs. (from T+3)

2017 • By industry, compensation of employees, wages and salaries and employer's social contributions required at T+2 months. (from T+3)

In addition, negotiation of further derogations continues. Tables 6 and 7 (Consolidated and Non-consolidated sector accounts) derogations are being sought until 2018, but this could be reduced to 2017.

Annex F: Summary of Planned Work by Year Before Blue Book 2014 Applicable to all outputs

• A National Statistics Quality Review of National Accounts is planned to begin in the autumn of 2013 reporting by March 2014. Recommendations from that review will be prioritised and reflected in next year’s update of the work plan

• The UK Statistics Authority plan to reassess the National Statistics status of National Accounts and Short-term indicators during 2013

• Support, and if necessary establish, a ‘user forum’ for each group of outputs that promotes discussions with and amongst non-government users by 2014

GDP and Short term indicators

• Blue Book 2012 saw the completion of the actions required to lift 2 of the 10 remaining GNI/GNP reservations. This included the introduction of new methodology and data sources for the measurement of the insurance industry. The formal process to lift these reservations should be completed during 2013

• Three further GNI reservations to be addressed in Blue Book 2013: o Separately identify minor repairs and maintenance of dwellings by owner occupiers of a kind

typically carried out by owners and classify as intermediate consumption in the production of dwellings. Adjust gross value added and gross operating surplus in dwelling services (for households' imputed rents) accordingly.

o Include the creation of cinematographic film originals in estimates of output and gross fixed capital formation.

o Include a mark-up for net operating surplus in estimates of own account software.

• Consider the presentation of the monthly output based components of GDP in the light of the availability of seasonally adjusted data on construction output.

• Reduce the frequency of Economic Position of Households to an annual publication and merging with Consumer Trends to provide a complete overview of trends in household income and expenditure (subject to consultation).

• Implement the ‘GDP improvement plan’, including: o a review of the construction survey methodology. o industry reviews, examining the methods of calculating the output in an industry (continues

beyond Blue Book 2014). o methods reviews of Household expenditure.

a review of the Education sector by the 2014 Blue Book o a review of how the Living Costs and Food survey is used in Household expenditure estimates o review of methods for direct measures of Government expenditure and output

focussing on Health for the 2014 Blue Book o transaction reviews, looking at the methods for individual ‘transaction lines’ in the accounts

(continues beyond Blue Book 2014) details of the priorities will be published in a separate article

o a review of the adjustment needed because the business register does not include ‘unregistered’ businesses

• Publish a review of GDP compilation methods. • Investigate improvements to current processes for producing nominal GDP. • Continue to develop the database of ‘revisions’ by including information on expenditure and income

components. • Publish more detailed components of historic (pre-97) Household Final consumption expenditure and

Gross Fixed Capital Formation by 2014.

• Consider expanding the current business investment statistical bulletin to include all components of Gross Fixed Capital Formation.

• Publish Input-output analytical tables on a SIC2007 basis in summer 2013.

Balance of Payments and Trade

• Examine options to improve the measurement of imports of services directly to households Sector and Financial Accounts

• Since the introduction of ESA95 in 1998, the full detail of SFA components has been available only back to 1987. We are working with academic partners with the aim of restoring consistent time series in line with what was available in the 1997 Blue Book. We are currently examining the scope of what is wanted and what can be achieved with the aim of publishing in 2014 on an ESA95 basis.

• Begin implementing an agreed programme of work to deliver some ‘quick wins’ on Flow of Funds. Public Sector Finances

• Improve the commentary in the Public Sector Finances and Maastricht Debt and Deficit statistical bulletins.

• Implement new processes for National Accounts classifications. • The 6-pack agreement will from 2014 bring in European requirements to publish more data on

contingent liabilities and regular monthly breakdowns of Local Authority expenditure and revenue. • Public Sector Finances are a complex area of statistics and the bulletin is therefore a difficult bulletin

for non-expert users to follow. In addition, the links between the Maastricht debt and deficit measures and the UK specific measures are split over two publications which has caused problems for some users. As part of our commitment to continuously improving our service to users, during 2013 we plan to review the presentation of these statistics looking at:

o the balance in the bulletin between different measures and how best to present a meaningful narrative to users on changes in public sector debt and borrowing;

o a review of the methodology underpinning the implementation of the ex-measures, their ongoing usefulness to users and how they fit into an overarching presentation of debt and borrowing;

o the readability and ease of understanding of these key statistics; o how we inform users and provide meaningful information surrounding one-off factors; o increasing the amount of underlying data available to aid analysis of trends in Public Sector

Finance Statistics.

Regional Accounts

• Development of a new output measure of regional Gross Value Added (GVA(P)) is required under ESA10 to satisfy the requirement for a measure of ‘real’ GVA growth at the NUTS2 level of European regional geography. We plan to publish the first full set of experimental results in December 2013, one year ahead of the ESA requirement.

• Remove the effects of smoothing from all estimates in 2013. • Develop independent workplace and residence estimates of regional GVA(I). A user consultation on

the results of an impact analysis of the workplace and residence estimates is planned for summer 2013, with the possibility of implementation in December 2013.

In Blue Book 2014 GDP and Short term indicators

• The remaining five GNI reservations will be addressed in Blue Book 2014

o Review the new compilation process of Non-Profit Institutions Serving Households with a view to improving estimation methods and coverage.

o Review methods to ensure exhaustiveness, updating benchmarks and modifying methods where needed.

o Include a mark-up for net operating surplus in the valuation of own-account construction output.

o Improvement the estimation of consumption of fixed capital on roads, bridges etc. o Investigate the impact of the use of list prices in the calculation of the household final

consumption expenditure on the purchase of new cars.

• Implement the standard means of transmitting data (SDMX) to Eurostat by 2014. • Publish historic ESA10 compliant data alongside Blue Book 2014 and develop methods and systems to

allow that to happen. • Introduce a range of ESA10/BPM6 changes (see annex E).

Sector and Financial Accounts

• Publish historic ESA10 compliant data alongside Blue Book 2014 and develop methods and systems to allow that to happen.

• Introduce a range of ESA10/BPM6 changes (see annex E).

Balance of Payments and Trade

• The transmission of monthly BoP will become a regulatory requirement in 2014 and responsibility will pass from the Bank of England to ONS.

• Introduce a range of ESA10/BPM6 changes (see annex E).

Public Sector Finances

• Consult with users on how we plan to manage options for introducing shadow measures of the key

Public Sector Finance aggregates to be introduced from the first publication of May 2014 data • Introduce a range of ESA10/BPM6 changes (see annex E).

By Blue Book 2015

• Improve estimates of detailed purchases used in the compilation of supply and use tables. • Update the methodological guidance on how GNI is calculated by September 2015. • Publish input-output analytical tables for reference year 2010 during 2015 and at five yearly intervals

thereafter as legally required. • Develop quarterly ‘commodity flow’ analyses that will ensure consistency of the different approaches

to GDP in both current and constant prices for major ‘difficult’ commodities (e.g cars, oil, energy, construction) and aim to publish these commodity flow analyses in 2015.

• Identify the improvements to sources needed to support quarterly supply and use tables with the aim of producing a costed plan for improvements by 2016.

• Publish historic SFA on an ESA10 basis with expanded detail in 2015 . • Produce a plan by 2016 setting out how we can become compliant with international initiatives that

have arisen following the financial crisis (e.g. the IMF SDDS+ exercise). • Implement the new ‘NUTS’ classification for producing regional accounts.

• The ESA10 Regulation also includes one voluntary item at the regional level: regional Household Final Consumption Expenditure (HFCE). Since it is voluntary this is a lower priority than the mandatory requirements, but it remains an aspiration for Regional Accounts development once the other requirements have been met (post 2015).

By Blue Book 2017

• Compliance with the ESA10 regulation largely complete: o Several improvements to the structure of the accounts are planned by 2017. o Introduce an increase in the number of sub-sectors in the economy for which full accounts

are required, including the legally required changes: Separation of ‘Non-Profit Institutions serving Households’ sector from ‘Households’

sector New sub sectors for the Financial Corporations sector.

o introduce a ‘full solution’ for production of the consolidated accounts by 2017 o Delineation of the state sector (Scotland, Wales and Northern Ireland). o Delineation of the Social Security Sector.

Beyond 2017

• Reintroduce the purchases inquiry in time to inform the 2018 Blue Book and become fully integrated into the 2019 Blue Book.

• Annual supply and use tables at previous year prices are required as part of the move to ESA10 and are planned to be developed by 2018.

• Significantly improve the quarterly source data feeding into quarterly supply and use. Given the changes to the survey programme planned in the coming years as a result of the ESA10/BPM6 changes, these improvements would not be forthcoming before 2019.

• Introduction of a ‘revaluation account’ and ‘other changes in volume account’ by 2018 • Additional data collection for full Flow of Funds data planned for 2019. • Undertake research into the feasibility of the measurement of global value chains from a UK

perspective.

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