Deep problems at the UK’s statistics agency with the quality of its data are piling pressure on officials in the run-up to the autumn budget, sources have told the Guardian.
Staff at the Treasury and its independent spending watchdog are struggling to get a clear picture of the economy because of troubles at the Office for National Statistics (ONS) with producing reliable numbers.
Such is the concern that insiders at the Office for Budget Responsibility (OBR) believe it may have to again highlight “significant uncertainty” in its forecasts because of poor official data, as it did publicly in March. Economists have also warned that the problems risk the chancellor, Rachel Reeves, making tax and spending “missteps”.
The OBR forecasts are key to the budget process, as they are used to judge the headroom the chancellor has against her self-imposed fiscal rules, and form the basis for her tax and spending decisions. Its work is also closely watched by financial markets. This can affect the cost of borrowing the government needs to help fund public services.
The ONS, which produces figures on a range of indicators including economic growth, inflation and unemployment that are used by financial markets and government agencies, is struggling with mounting problems as it has delayed or cancelled several of its releases.
Its labour force survey (LFS) – the official measure of employment in the UK – has been beset with problems amid a collapse in response rates. Only this week, it postponed the release of retail sales data due on Friday for two weeks “to allow for further quality assurance”. Household wealth data has also been downgraded and is no longer treated as “official” because of quality concerns.
The longer the data quality problems persist at the ONS, the more acute the challenge becomes, sources familiar with the matter told the Guardian. One said: “We are, to a significant extent, flying blind on major areas such as the jobs market.”
They added that while other datasets might offer indications of the health of employment in the UK, nothing could replace the fundamental role of the LFS.
This echoes public criticism of the ONS by leading economists and officials, including the Bank of England governor, Andrew Bailey, who said earlier this year: “It is critical from our point of view that these issues are addressed.”
An economist with close knowledge of the OBR’s processes said there were difficulties in forecasting the path of the debt-to-GDP ratio because the official figures had been frequently subject to revision.
They added: “Knowing what is happening in labour market, producer prices, etc, is critical. Chaos at the ONS will have a material impact on the government policy path via ONS projections.”
In April, the head of the OBR, Richard Hughes, told the Commons Treasury committee the forecaster was relying on a “panoply” of alternative data because of quality issues and frequent revisions in key ONS figures.
“Ideally, what we want to do is have a snapshot of where the economy just was before we try to figure out where it is going over the next five years. Instead, at the moment, we get an incomplete picture from different points in time from what we get from the ONS,” he said.
The ONS has faced harsh public criticism in recent months over “deep-seated problems”, adding to the pressure on the Newport-based number-crunching office to improve its data gathering. Earlier this month, Darren Tierney, a former top Cabinet Office official, was brought in as its new chief executive.
No date has yet been set by Reeves for the autumn budget. The chancellor must give 10 weeks’ notice before a fiscal event for the OBR to produce its forecasts. However, in reality it maintains near-constant monitoring of the economic picture.
Ruth Gregory, the deputy chief UK economist at the consultancy Capital Economics, said inadequate data could lead Reeves to cut spending or raise taxes unnecessarily at the autumn budget.
“If the OBR is unable to get an accurate read on supply, that could lead to fiscal policy missteps.”
The problems with the ONS’s labour market data stem from plunging survey response rates since the Covid pandemic, similar to the experience of agencies in other countries. The ONS has said its latest jobs market figures include the full effects of improvements in data collection and sampling methods introduced from January 2024. However, efforts are continuing to further improve response rates. It has previously warned the process could take until 2027.
Jagjit Chadha, a Cambridge university economist and former director of the National Institute of Economic and Social Research, said there was “considerable dysfunction in Newport”, partly as the agency had been pushed to make cost savings.
“The ONS is a bit of shower at the moment,” he added.
While warning the problems could result in “the wrong policies. With fiscal policy overly tightened”, he said heightened uncertainty meant Reeves should proceed with caution. “While it’s useful for policymakers to blame the ONS if they get things wrong, should you be driving a car with mechanical problems as fast as you’re trying to drive it? The answer is no.”
A spokesperson for the OBR referred the Guardian to its previous comments in March.
A spokesperson for the ONS said: “We have been open and transparent about the issues with some ONS statistics. A strategic plan is already in action, and with new senior leaders now in place, we are working closely with key users and urgently refocusing resources on our core economic outputs.
“Revisions to population statistics are unrelated and are due to unprecedented levels of international migration seen over recent years and short-term volatility which results from change.”
A Treasury spokesperson said: “This government is building a stronger economy for a renewed Britain, kickstarting economic growth based on rigorous and robust analysis of the economic and fiscal challenges we face.
“HMT uses a vast range of data sources to support policymaking. We fully support the ONS’s plan to improve their core economic statistics and are working closely with their new leadership team.”
This article was written by Anna Isaac and Richard Partington from The Guardian and was legally licensed through the DiveMarketplace by Industry Dive. Please direct all licensing questions to legal@industrydive.com.