Official Statistics

HL Deb 23 February 2005 vol 669 cc1271-93

6.26 p.m.

Lord Marlesford

rose to call attention to the adequacy of official statistics for the determination of policy; and to move for Papers.

The noble Lord said: My Lords, as we work our way through life, as politicians, civil servants, people in some other public role, people in business or mere citizens of a state, we never really know where we are going, let alone where we will end up. It is, however, helpful to know where we have come from and, if possible, where we are. It can help to guide us on the route ahead and, perhaps, give warnings of obstacles and precipices in our path.

The main value of statistics is to help with such much-needed guidance. They therefore fulfil a noble and crucial role in national life. Their accuracy and, above all, their integrity are the measure of their worth. A particular responsibility of government is to identify the information that is needed to guide public affairs and to use the statistical facilities to provide it.

Let me use a general example from the private sector. It is probably a mere half century since businesses realised that cash flow was an essential tool to ensure that they remained viable. In some form or other, cash flow is now used almost universally. It is even less time since the government of the day realised that rapidly rising inflation was making the old Plowden system of the 1950s—planning public resources in volume terms and making the cash available through parliamentary supplementary estimates, usually passed on the nod—was no longer viable and was contributing to financial catastrophe. That was in 1976, which followed the infamous year in which inflation in this country reached 26 per cent. The conclusion was that there was a need to introduce cash limits to control public spending.

The credit for that great change was certainly not due to the then Chancellor, the noble Lord, Lord Healey. It should go to Sir Leo Pliatzky, the then Second Permanent Secretary at the Treasury. As a journalist on the Economist, I used to discuss the problems with Sir Leo. It was a useful link for me and had come about because I had suggested in that paper that there was an urgent need for the government to introduce cash-flow controls.

There is now public disquiet about the relevance, accuracy, validity and, indeed, integrity of the use of some statistics in the conduct of government business and the formulation of public policy. That is why the Opposition have decided to have this debate today. The Omnibus Survey shows that two-thirds of the general public believe that figures are changed to support an argument and that mistakes are suppressed. I think that they are right. Over half believe that there is political interference in the production of statistics. I think that they, too, are right. On 28 February the Office for National Statistics and the independent Statistics Commission are each publishing a report on this serious situation.

There are so many examples of misleading or misused government figures. I start with two fundamental examples from the heart of government—the Treasury. The first I owe to my noble friend Lord Howell of Guildford who described it so well in his book, The Edge of Now. It relates to the decision on 4 June 1998 of the Monetary Policy Committee of the Bank of England to raise short-term interest rates yet again. A crucial factor in the MPC decision was that the ONS figures had shown that earnings were rising alarmingly in the service sector of the British economy. It subsequently transpired that the figures were substantially wrong and a great deal too high. The collection, sampling and evaluation were all to blame. The House of Commons Treasury Select Committee subsequently issued a sharply critical report on the affair.

My second example is bang up to date. It refers to the remarkable decision announced in January to reclassify the expenditure on the repair and maintenance of roads—a very large sum—as capital rather than current expenditure. Some might suspect this transfer of expenditure from above to below the line, which is so helpful to the Chancellor in his struggle to balance the books before the election, is just too much of a coincidence.

Frankly, the explanation given by Mr Len Cook, head of the ONS, in today's Financial Times makes no sense at all. The idea that any private sector enterprise would be prepared to have maintenance costs of any capital assets, whether buildings, roads, plant or machinery as capital expenditure, and therefore disallowed for deduction against trading revenue, and thus for tax relief, is absurd. It flies in the face of the need, which I hope the Minister will confirm, for public finances to be subjected to the same disciplines as private finances whenever possible.

That is essential so that proper judgments can be made in national resource allocation. Otherwise, we could once again descend into the socialist morass of pre-emption of resources for public purposes without that discipline of which our cautious Chancellor is so proud, and which the EU stability and growth pact rules are supposed to underwrite.

I should mention to the Minister that yesterday we had his honourable friend the Financial Secretary to the Treasury along to Sub-Committee A, and I raised the matter with him. One of the Treasury officials helpfully said that Eurostat will be commenting on the point I am not sure that Eurostat is held in great regard for its integrity at the moment, although it did a good job in establishing that the Greek Government's deficit for 2003, which was originally reported as 1.7 per cent of GDP, was in fact 4.6 per cent. We are all well aware that the head of Eurostat, M. Yves Franchet, along with some of his staff, had to be removed for some rather doubtful financial behaviour. It may be that Eurostat is not the answer to our problems.

That brings me to what we as a party have proposed. My right honourable friend Mr Oliver Letwin, has published our framework for financial accountability, together with a national statistics draft Bill. Under this radical approach we would make the ONS independent, responsible directly to Parliament, with at its head a national statistician who would be an officer of the House of Commons. It would not collect the data but would analyse it and have a central role in planning statistical activities across government. The auditing of the validity and integrity of government statistics is well overdue.

I underline the importance of the Government getting the statistics that they actually need for the formulation of public policy. That means asking fundamental questions as to what figures are actually needed, and for what.

Let me give an example. Recently, I elicited through Written Answers, the astonishing fact that it would appear that in 2003–04, Defra's Rural Payments Agency, which has the job of paying and administering the CAP schemes, had a gross cost of £3.6 billion before making payments under the IACS scheme of £1.6 billion. It thus apparently cost more to run the scheme than the scheme gave to farmers. Surely someone in government should have worked out the cost-effectiveness of the wretched CAP. It does seem to me to be a prima facie reason in favour of the renationalisation of farm support.

I do not have time to go into the many other areas in which the Government have had completely inadequate statistics. Immigration is one example. I listened to part of the previous debate, when again and again statistical problems were the key to what was needed. Another example is the lack of an adequate exchange of data between the National Register Office and the Passport Agency, which I have discussed with the Passport Agency. Further examples are the needs of the National Health Service; penal policy problems, that were so well highlighted by Sir David Ramsbotham in his deeply disturbing book, Prisongate; and education results, to mention but a few. Perhaps the biggest failure was the lack of early warning for a policy change. The demographic changes should have caused the Government to face up much earlier to the need for the change of retirement age.

I conclude with three proposals. First, there should be a review of all the figures that are collected in terms of their current relevance rather than their historical importance. For example, do we need all those figures collected from farmers that date from a time when agricultural had a greater importance in the national economy? Secondly, the collection of statistics should help the private sector as much as the public sector and local government as much as central government. Thirdly, Ministers should constantly ask themselves what statistics they really need to know to run the country properly. I would call that a creative approach to statistics planning.

I have a final thought for the party that got to power and has remained in power to a significant extent through its considerable—indeed enviable—skills of presentation. It is ultimately bad politics to mislead the electorate by playing fast and loose with figures. It is bad government to mislead yourselves in the same way. I beg to move for Papers.

6.37 p.m.

Lord Moser

My Lords, I am very grateful to the noble Lord, Lord Marlesford, for introducing this subject, which is close to my heart after a lifetime spent in statistics.

I need to distinguish the three elements of the set up: ONS, the Office for National Statistics, and its head called the National Statistician; all the departments—each ministry—have their own statistical office; and, independently of those two, the Statistics Commission. which the Government set up in 2000.

It is true that there have been some errors, especially in the construction of macro-economic statistics. If I had lots of time I would try to explain the incredible complexity of GNP. It is rather a miracle that all over the world statisticians in government can piece together from literally tens of thousands of bits of information on income, expenditure, production, and so on, the national accounts. It is a remarkable achievement, but it is so complex. Bearing in mind that every little bit probably has an error attached, it is even more remarkable that the sum total—the ultimate GNP—is as accurate as it is. Incidentally, it is widespread opinion round the world that our statistical system is one of the best in terms of accuracy, but occasional errors will occur, and the noble Lord has mentioned one or two.

It is crucial that we distinguish between errors and revisions. It is inevitable that if one tries to produce economic or any other statistics very quickly, there will be errors that will be corrected when later information is available. These are called revisions. Every country does them. It is part of the ordinary process of producing good statistics that when later information is available, one corrects the initial estimate.

In this country, the record is extraordinarily good for recent years. Between the first and third estimates, the difference is usually of the order of 0.1 per cent, which is fairly trivial. But there will be revisions. One of the examples given by the noble Lord was a revision caused by new information becoming available. There is a trade-off. We could lessen the revisions if we took more time, but the Government's pressure is always on timeliness. So data are published very quickly, then later revised.

One reason for revision is later information. The other reason is that methodology is constantly being improved. That is the role of the statistical office. For all of my 10 years in charge, one was always trying to improve methodology. Perhaps I may say that road maintenance, which has now hit the press, is the latest example. It is absolutely correct for the National Statistician, with his office, to seek constant improvements—one such was sought in 2002 on this subject.

Whether the statisticians are right in making that change is a technical matter. On the whole, they are governed by IMF, World Bank, OECD and United Nations rules. They may be wrong in that technical change, but it has nothing whatever to do with, as, sadly, the shadow Chancellor said, fiddling the figures. That is a ministerial and political point. One can argue about the methodology, but one cannot call it fiddling the figures. In fact, Ministers did not even know that that change was being discussed by the technicians.

Everyone, including politicians, has to get used to the fact that there are errors and revisions. When I was in charge, my main problem was Ministers and the opposition parties over-interpreting the accuracy of figures, which is a greater problem in causing public mistrust than faulty figures. That is my first point on the present concern about accuracy and revision.

In my view—I am no longer in any way involved—the ONS now has a very fine record of macro-economic statistics. It also has a good record on social statistics and on widening user links, because the Government are not the only customer for official statistics. Equally important are local government, the trade unions, the business sector, the academic world and the general citizen. The ONS record in widening its customer base is probably one of the two or three best in the world. It is also very good at research and innovation. I could give a number of examples, but I will not take that time. All told, the ONS, including its leader, Len Cook, the retiring National Statistician, deserves its high reputation for statistical accuracy and leadership.

Public trust remains a major problem. It is probably greater in this country than in any other. It relates partly to the statistics about which the noble Lord, Lord Marlesford, spoke, but it is also a wider issue. The trouble is that many of the Government's statistics are not published by the ONS. As I said, each department has its own statistical office. For example, National Heath Service waiting lists are the responsibility not of the ONS, but of the Department of Health; migration and crime statistics are the responsibility of the Home Office. We have a semi-decentralised system where some of the most sensitive statistics are published by departments, independent of the ONS.

The National Statistician, which was the post that I held, is widely regarded as responsible for those statistics. He tries to influence departments, but that influence is very limited. He has strong influence over appointments to statistical offices, but not over what departments do. In my view, the greatest problem regarding public trust links not to the ONS but to the individual departments. There are errors in those departments and they do not always obey the codes of conduct that the National Statistician has turned out.

In my day, the National Statistician, and that was me, was responsible directly to the Prime Minister via the Cabinet Office. In a strange way, that gave me, and my office, a greater reputation for independence than if I had been under the Treasury. It is a matter certainly for discussion whether the statistical office in future should remain so closely linked to the Treasury with its very clear policy interests, as opposed to under the Prime Minister or, in some sense, separate.

I conclude with a few final remarks. First, the Statistics Commission was set up primarily to monitor and scrutinise all government statistics. It does a first-class job. Its publications—now some 20-odd reports—are of the highest order. It is independent of government and, through its independence, achieves the kind of aims that the opposition party is now looking for. The Statistics Commission should be strengthened and should feel more free than at present to criticise Ministers and the media when they misuse statistics.

Secondly, I would keep the National Statistician and the Office for National Statistics as they are. It would be a disaster from a statistical point of view to separate analysis from collection, as has been proposed. The ONS should build on its strengths with full government support.

Finally, there is a great deal to be said for the proposal from the Statistics Commission that, partly in order to keep the departmental statisticians under greater control, there should be statistical legislation to bind it all together under the authority of the Statistics Commission as a statutory body, which I hope the Government will consider.

6.49 p.m.

Lord Brooke of Sutton Mandeville

My Lords, it is a daunting prospect to follow the noble Lord, Lord Moser, for reasons of my own very slight personal experience in this area, but it is nevertheless a great privilege.

All our speeches in debates such as today's open with a conventional paean of praise and appreciation for whichever noble Lord has opened the debate. But my thanks to my noble friend Lord Marlesford are the more heartfelt because, by choosing this debate, he has opened my eyes to how much has been going on in the field of official statistics over the past decade.

As to the opening of the debate by the noble Lord, Lord Marlesford, I still retain pleasure at the barrister who, after affording consultation in his Chambers to a solicitor and his client would conclude the occasion by saying, "Well, there we are. I don't know where we are, but there we are".

My credentials as a statistician to create a statistical paradox are less than minimal, though in the second year of an MBA at the Harvard Business School 45 years ago I did do the optional course of advanced applied statistics under the legendary coupling—legendary at least within Harvard—of Schlaiffer and Raiffa. Schlaiffer was a full professor with a background in ancient history and I think that Raiffa was an assistant professor. I can still recall moments when they would turn towards the class and say that they wanted to have a private bilateral debate for five minutes but since they would take short cuts we were under no obligation to try and follow what they were doing on the blackboard. I also learnt more than a little at the feet of Sir John Kingman when he was chairman of the Science and Engineering Research Council and I was his inadequate Minister.

I alluded to the developments in this field over the past decade, going back to the 1996 Act under the previous government. They will be familiar to those taking part in this debate, which obviates the need to repeat them, but I want to dwell on some aspects of the use or abuse made of statistics by politicians. I am conscious that I am at the margins of the subject of this debate in doing that, but I notice that there have been other references in earlier speeches. The integrity and adequacy of statistics is an important foundation to the confidence the public place in them, and if politicians undermine that confidence, they are not rendering any service to the common weal.

It is an odd anorak addiction to admit to, but my party—and no doubt other parties too—maintains an e-mail running commentary on the statistical background which our opponents are applying either in support of their postures or on a rebuttal basis to observations that we have made on their records. I fear that the instant rebuttal principle which we have absorbed from the United States is the enemy of intellectual honesty—I picked up on what the noble Lord, Lord Moser, said—yet intellectual honesty is critical to the good health and reputation of statistics.

I am particularly concerned when Ministers take public exception to statistical analyses produced by their own official departmental body. There was one such by the Health Secretary in commentary on an article in the Guardian in October 2003 about ONS statistics from 1997 showing deterioration in NHS productivity over the previous six years. I have not the slightest objection to Cabinet Ministers disagreeing with their own official statistics, but the common weal is better served if collective responsibility is observed in public and internal argument conducted in private. As to accusations across the political divide of lying, even if described as "fibs" buttressed by statistical arguments, I sigh for the demise of one of my favourite 19th century earnest endeavours, the Society for the Suppression of Mendacity.

One of the immense virtues of the Minister who is replying to this debate is his own intellectual honesty. He is robust in defence of the Government's achievements and policies when he believes alternative views are wrong, but he is magnificently generous when, as with David Willetts's unveiling of conceptual errors in official pension statistics, he believes that credit is due elsewhere. He is a model to the generality of the administration in which he serves.

Some of us in your Lordships' House will be looking forward to Sir Christopher Foster's new book on public policy to be published next month, not least because he has served over three decades as an adviser to governments of different cues and in different departments. None of us can be sure until publication day what he will say, but I have some cause for thinking that he will deplore the decline in the amount of statistical background to policy choices which government official papers of whatever colour now display in favour of the alternative of setting out the outline of the Government's ideas and then laying greater emphasis on consultation.

If I am right, we shall have to await the historians' verdict on this Government as to whether this is the general cultural change or a predilection of this administration. But I am personally greatly attracted by my party's desire to see the independence and expansion of official statistics tied to the same kind of gold standard as the National Audit Office provides. The Government who conferred independence on the Bank of England might sensibly be attracted to the same principle. In the mean time, it is in tune with my right honourable friend Michael Howard's emphasis on accountability.

The Royal Statistical Society has given my right honourable friend's intentions a guarded welcome, while sensibly implying, as it did to the similar general pledge by Labour in 1997, that the proof of the pudding would be in the eating. Meanwhile, the Statistics Commission, created as we know by the present Government, has shared the view of the Treasury Select Committee, the Royal Statistical Society and the report of the independent government communication review group—the Phyllis review—that although the non-statutory framework for official statistics introduced in 2000 has been beneficial, legislation requiring government departments and agencies to follow a new statutory code of practice, enforced by a statutory commission, is necessary.

I conclude with a final bee which has buzzed in my bonnet throughout this Government's life—their insistence on referring to running costs as investment. In the last Parliament, in response to a press release, I took my life in both hands and taxed the present chairman of the Labour Party, when he was at the Cabinet Office, with Labour's divergence from Sir John Hicks's magisterial work on national income accounts. He effectively adopted the attitude of Humpty-Dumpty that he could call anything whatever he liked.

I listened carefully to the observation of the noble Lord, Lord Moser, about the roads expenditure example. I cannot help feeling, however, that the description of revenue expenditure as investment runs the risk of undermining public confidence in the process.

6.56 p.m.

Baroness Byford

My Lords, I feel great timidity in following such eloquent speeches from my noble friend Lord Brooke and the noble Lord, Lord Moser. However, I would like to begin by thanking my noble friend Lord Marlesford for introducing this debate tonight. When it came up, I thought that I would be totally inadequate and unqualified to speak in this debate so I wish to make my contribution in a slightly different way.

The primary aim of the Office for National Statistics is: To provide an accurate, up-to-date, comprehensive and meaningful picture of the economy and society, [and] to support the formulation and monitoring of economic and social policies by government at all levels". I reflected on how that affected the work that I do in leading for the Opposition on the environment, food, farming and rural affairs.

My noble friend rightly referred earlier to the difference between the Government's position and that of private business. In some cases, if cash flow were allowed to run as rampant as it is in private business, some businesses would be in closure much earlier, so it is important that statistics are correct and that various government departments can assess and control their public spending in the correct manner.

There is also, as another noble Lord said, an opportunity for parliaments, citizens, local governments and many other outside bodies to judge what the position is in various aspects of government business. My noble friend was right to give the example of the IACS scheme where more money has been spent on delivering the system than has been paid to those who it is supposed to help. That is nonsense.

This debate gives me the chance to reflect on some of the questions that I have asked the department over the past few years and which I would like to share with noble Lords tonight. One Written Question that I asked was about the assessment, made of the extra cost of providing public services in rural areas in England compared to urban areas". The Answer was that, no overall assessment has been made of the different costs of providing public services in rural areas in England compared with urban areas"".—[Official Report, 10/05/02: col. WA 206.] If not, why not? A BMA report has just come out that highlights the difficulties of getting coverage within rural areas.

Another Question was about the account that the Government will, take of the extra cost of providing public services in rural areas in the local government grant distribution formula in or England". The reply was that: this included issues of concern to rural areas, such as the treatment of sparsity. We will consult on options for reform over the summer and will consider the responses when we come to take decisions".—[Official Report, 8/05/02: col. WA 183.] I wonder how much further that matter has moved on.

There was another question about incorrect statistics. I accept what the noble Lord, Lord Moser, said—but that does not help us when we are trying to judge the department and what is going on if the statistics are wrong.

In August 2002 I raised two questions with Defra. My first was about why capital spending in terms of actual out-turn and planned out-turn for 2002–03 and 2003–04 is in every case more than £1 million above the departmental expenditure limit. It seemed a perfectly straightforward question.

I was told that there was an error. The tables that I was asking about had, complications with compiling historical information following the recent Machinery of Government changes, and the restructuring of DEFRA with its revised objectives that followed". Delay would surely have been better, rather than producing incorrect figures. Here I do not necessarily agree with the noble Lord, Lord Moser. but his experience is much better than mine.

I turn to another subject that I find extremely worrying. In February this year I asked how many consultations have been issued by the department since its inception. I was told that some 222 consultations had taken place and 193 were completed. The reply went on to say that the Government do not hold information centrally on how many have resulted in a formal action, but many have led to proposals being changed in response to the stakeholders' comments.

I wonder why an overall impact assessment was not done. Surely this has implications for the department's budgetary action.

I shall return to rural proofing and give another example. When I asked the Government which departments had failed to achieve their rural proofing in the last full year, the answer came that the Countryside Agency published its report on its first full year of rural proofing in April and that table 2 in the report commented individually on how far rural proofing had been effectively implemented in each of the departments. The answer went on to say that the report does not explicitly categorise some departments as having succeeded and others as having failed. What then was the purpose of the exercise?

I again turn to regulatory matters. I asked a Question on the costs of what is called the WEEE directive, the Waste Electrical and Electronic Equipment Directive. In his letter, the noble Lord, Lord Sainsbury of Turville, replied: A partial regulatory impact assessment to assess the financial and other impacts of the … Directive … was completed in March 2002. A further assessment will be carried out once the Directive has been adopted. Any indirect costs which Local Authorities might face as a result of the UK's approach … would be an important factor in agreeing the best legislative framework". Was it only a partial assessment and not a full assessment? It seems strange.

I turn to another issue that I have been following for many months. I asked the same department, Defra, how many consultants and professional advisors were employed by the department in each of the years from 2000 to 2003. The letter I received in response from Defra stated: The information requested cannot be provided as it is not held centrally. The Department is in the process of compiling a central list for the future, but this will take some time to complete and will not be retrospective". Is it just me who wonders how you can run a department if you do not know the costs that you are incurring? How can one budget for that? Surely you would need to know that necessary information.

In raising these issues, I have tried to highlight some of the reasons why statistics are very important to all of us, whether we are in government or in opposition, but I suspect they are more important to those of us in opposition. The Government, after all, have their civil servants to do a lot of the work for them. I end with one more example, where I think that the Treasury has made a big mistake. This is on the question of the introduction of the horse passport scheme. My question was why value added tax registration was not considered during the setting up of this particular scheme. The letter answering that stated: VAT is specifically a Treasury matter and was, therefore, not included in the consultation carried out by this Department regarding the proposals to extend horse-passport requirements to all horses. However, Customs and Excise are considering representations". That is highlighted because now that it has gone out to organisations, VAT has to be paid on it, whereas if it has been a government scheme, such as the cattle scheme, there would have been no VAT on it. Surely there should be joined-up government and departmental understanding.

I again thank my noble friend for raising this issue. I am sorry that my tack has been slightly different from that of other noble Lords, but I have highlighted the difficulties some of us have our job in the way that we feel we should be doing it.

7.6 p.m.

Lord Northbrook

My Lords, I am grateful to the noble Lord, Lord Marlesford, for initiating this important debate on the adequacy of official statistics for determining policy. I particularly enjoyed the contribution of the noble Lord, Lord Moser, having been at the coal face.

A year or so ago this would have seemed a rather arcane subject to be debating, but it has been getting rather more publicity recently. Indeed, Saturday's Financial Times gave it front page coverage. It is with that article that I would like to begin. The article starts: The Treasury was embroiled in a row over 'fiddled figures' last night, after government statisticians said they would reclassify public sector accounts before the budget in a way that could save the Chancellor from breaking his self-imposed rules on borrowing". In a footnote to the public finance figures, the ONS said that it would make a "substantial" reclassification of road maintenance expenditure.

On page 2 of the same edition of the Financial Times, the headline to a further article was: The national statisitician's reputation for independence is at issue in a balance sheet switch". The article goes on: Buried within yesterday's press release from the Office of National Statistics was a potential bombshell, which could save Gordon Brown from embarassment over the public finances but risk damaging the national statistician's reputation for independence". The article goes on to say, as referred to be other speakers, that the ONS had decided that some government current spending on roads should be classed as capital expenditure. That was, said the Financial Times, supremely convenient to the Chancellor, who is expected to have to raise taxes after the election if he is to meet his golden rule". The article goes on to say that the Chancellor has made meeting his fiscal rules an issue of political credibility and, with the Budget and the general election coming up, would not want his grip on the public finances to appear shaky. That is why, the article continues, it would not be surprising if the Treasury were to fudge the way the rule was calculated and why the ONS announcement raised eyebrows among some unnamed economists who said, according to the Financial Times, that the impending reclassification was an example of government "jiggery-pokery" with the accounts.

Richard Alldritt, chief executive of the Statistics Commission, the watchdog set up by the Treasury in 2000, said: The timing issue looks potentially uncomfortable so we will be askng the ONS what triggered it and to clarify why it was wrong to classify some of this spending as current in the past. We reiterate the need for demonstrable independence in official statistics". The ONS then rushed out a statement asking more questions than it answered, saying that the Treasury influenced its decision to reclassify the statistics, but that its influence was not improper". With great respect, that would seem to refute the comments of the noble Lord, Lord Moser, that Ministers knew nothing about it. Peter Spencer of the independent Item Club said that the move was likely to show how close the Government were to meeting or breaking their fiscal rules.

Finally on this subject, I am sorry that the ONS could not have published the reasons for the change in time for this debate. Surely if the office made the change, it must know why in advance—or was it compelled to do so in such haste that it had to think of the reasons for it afterwards?

That latest episode led me to recall some other interesting examples of the Government adjusting statistics. Last year the Treasury was accused by some economists of a fudge because of a change in presenting the golden rule. Instead of simply subtracting deficits in one year from surpluses in another—a method referred to by the Chancellor in the past—the Treasury has calculated those budget balances as proportions of gross domestic product. This means, as I understand it, that past surpluses gain relatively more weight compared to current deficits.

The National Institute of Economic and Social Research warned two years ago of the likelihood that the Government would have encouraged a careful analysis of the constituents of current and capital spending. Martin Weale, its director, said last week: It is perfectly reasonable for the ONS to look at this but part of the trouble is that it is not completely independent—it reports to the Treasury rather than to Parliament—so the risk is that people will assume that there has been political pressure. If we had statistical independence, that concern would be allayed". The Conservative Party has just such plans, which I will come on to later.

I can further recall earlier examples of the Government ensuring that much of their transport expenditure was classified as capital rather than current. In the 2003 review of railway finances, the Department for Transport put in a late request to the then rail regulator, Tom Winsor. to pay rail subsidies in the form of grants to Network Rail rather than subsidies to rail operating companies. And why was that? Because grants count as capital expenditure in government accounts, while subsidies arc classified as current expenditure. The regulator said that it was, regrettable that such a fundamental issue should be raised at such a late stage in the review". But he granted the request, which will help the Government meet the golden rule in future by about £6 billion.

The Government have not been consistent about what should or should not be on the books. Take, for instance. foundation hospitals: the Chancellor insists that they should stay on the government books and not be allowed to borrow on their own account because the Treasury would have to bail them out if they went bust. Yet the Treasury has been very happy to take a very different view in cases where to admit that it was lender of last resort did not suit it— for instance, with Network Rail. While the Treasury has recently agreed to include Network Rail's £21 billion debt in the whole of government accounts, which are to be published for the first time in 2005, the Chancellor still refuses to include the debt in his own calculations of whether he is meeting the golden rule.

Sir John Bourn, Comptroller and Auditor-General, has insisted that Network Rail borrowing he included as a form of public debt. In a letter to the Statistics Commission late in 2002, Sir Andrew Turnbull, the Cabinet Secretary, indicated that the Government would accept Sir John Bourn's demand. But in a bizarre twist it will be included in the whole of government accounts but not in the golden rule calculations. That in my view is clearly nonsense.

These inconsistencies show the huge need for a more independent statistics monitoring regime. The Government were clearly mindful of that when they published their framework for national statistics in August 2000. It was full of laudable statements such as that the Government believed national statistics should provide an accurate, up to date, comprehensive and meaningful description of the UK economy and society. They said that it would, be used by government, Parliament and the wider community and in decision-making and debate, and will offer a window on the work and performance of government itself". That sounds all well and good.

Also in 2000, the Government created the Statistics Commission, as, an independent non-departmental public body to help ensure that official statistics are trustworthy and responsive to public needs". It operates independently of Ministers and the producers of statistics and does so openly, with all its papers normally available publicly. Since being set up it produced a report in May 2004 entitled Legislation to Build Trust in Statistics. In summary, it recommended legislation that, will require government departments and agencies to follow a new statutory code of practice enforced by a statutory commission. This will help ensure we have a statistical service in the United Kingdom which serves, and is seen to serve the public interest". In the minutes of a meeting to discuss how to take forward its report, the commission states how it expects the Government to respond. It said that, a formal government response is expected but is unlikely to contain any promises. Our informal understanding is that the door remains open for discussion and that the relative simplicity and evolutionary nature of the proposals are strong selling points. Less helpfully the issue is seen by some as encouraging criticism of the government and of official statistics". Without such a framework, the ONS continues to be put under pressure.

The Atkinson report, commissioned by the ONS was a welcome inquiry into the measuring of government output in the national accounts. Time prevents me discussing it in as much detail a I would like, but I shall quote its conclusion that, there is a need for major improvements in indicators used to measure public service outputs". The report also urged the Office for National Statistics to be transparent.

The Conservative Party plans to make the Office for National Statistics independent of Ministers. We believe that it could be run according to the structure of the independent National Audit Office. I shall leave it to my noble friend Lady Noakes to describe our plans in more detail, but I should like to say that 1 believe they offer a much more sensible, honest. and transparent system for national statistics than we have today.

7.17 p.m.

Lord Oakeshott of Seagrove Bay

My Lords, I have only one claim to fame in the world of statistics. I imagine that it is unique in this Chamber. I was put in charge of a country's cost of living statistics at the age of 21—those of Kenya in 1968, eight weeks after my final exam in PPE in Oxford, luckily with a special paper in statistics. Among other things, I ran their motor vehicle statistics, and gratefully received from the Nairobi BMW distributor the only little bribe that I had in my two years in Kenya; what a sad contrast to the corruption there today. That bribe was a pair of scissors for my desk, which work as well today as they did 36 years ago. Thank goodness for that, I think, when my heart sinks at the daily pile of post that we have to open in this place. It is another triumph of German engineering reliability: they manufacture too well for their own good. Another reason for caution in interpreting statistics, however, is that those scissors will have featured only once in national accounts, while I have enjoyed their services for 36 years.

Statistics used to be a dry, technical subject. However, first economics, and now politics and other social sciences have become far more mathematical. with a welcome shift of emphasis from high-flown theorising or blue-sky thinking—to use the cliché du jour—to measurement and empirical testing. So statisticians have rather come out of the closet.

As we have heard already from the noble Lords, Lord Marlesford, Lord Northbrook, and others, decisions by the National Statistician in this country on how to classify the operations of Network Rail, for example, as we were hearing, and more topically on whether to treat road maintenance expenditure as capital or income, can have a critical impact on the ability of government to meet important and highly visible targets that they set themselves. When apparently statistical rulings take on great political significance, it is time for us to stand back and to ask whether our national statistical service is not only acting independently but is clearly seen to be acting independently. Sadly, that is not the case today.

As the independent Statistics Commission points out, trust in statistics is essential for effective administration and delivery of public services. Unless decision-makers trust the statistical evidence they will ignore it with a potential high economic cost. Unless the public trust the figures, they won't trust the decision-makers—they won't believe Ministers, for example, on the National Health Service". Last week we heard that national statistics were to make substantial reclassification of road maintenance expenditure from income to capital account—which would. coincidentally of course, give the Chancellor a thick safety cushion against breaking the golden rule. We are told the decision was taken entirely by the National Statistician, but, after a joint enquiry with Treasury statisticians". Who took the initiative for this inquiry, and why? Ask yourselves: how many small groups of statisticians are huddling together in corners of the Treasury, trying to work out where they can hold joint inquiries with national statistics to reclassify elements of capital expenditure as current spending?

I have today spoken to the chairman of the Statistics Commission, asking him to carry out a thorough inquiry into who initiated the possible reclassification of road expenditure—and why—looking carefully into the audit trail and the unusually opportune timing of the announcement. I found him most receptive to this request. With the greatest respect to the noble Lord, Lord Moser, I believe that he is being rather naive in underestimating the degree of political pressure on statisticians today. I do, however, warmly welcome the noble Lord's suggestion that national statistics should not be so closely linked to the Treasury.

There is a clear conflict of interest if the Chancellor of the Exchequer appoints the National Statistician—and reappoints him, as happened with Mr Len Cook, shortly after his classification of Network Rail as a non-public body, despite the effective government guarantee. Now, Mr Cook has had a rough ride from the press—unfairly so, perhaps, to some extent—and certainly all the rougher because his name is such a gift to headline writers. He might have got off more lightly—and this is a true story—if he had the name of the chief statistician of the Department of Education in the 1970s; Mr K G Forecast.

No other finance minister in Europe appoints the head of their national statistical service. I am sure that the noble Baroness, Lady Noakes, will develop what the noble Lord, Lord Northbrook, already said about Conservative plans for independence of the national statistical service. I think that is a useful piece of work: certainly, the proposals that they make would be a considerable improvement on the present situation. However, I doubt whether it is necessary to have quite so much organisational upheaval as they propose. Indeed, I rather agree with the independent Statistics Commission, which, in commenting on the Conservative proposals, said that they obviously had, some important parallels with the Commission's recommendations—notably a statutory body reporting to Parliament and a binding code of practice that all government departments and agencies would be obliged to respect". They welcomed, as I would, the, commitment and the explicit recognition of the importance of an independent statistical service". Yet there are significant, substantial changes there—particularly, under the Conservative plans, involving removing a large number of staff from the Civil Service. I would have thought one could achieve the same effect by going more down the line which the Statistics Commission itself produced in May of last year.

The Statistics Commission has, so far, done a robust, independent job in pressing for improvements in official statistics and cutting the scope for the Government to delay or spin official announcements. However, the key point is that the commission can only advise. It cannot decide. It must, in the view of these Benches. he reconstituted. It must be given the statutory power to appoint the National Statistician, to lay down the code of practice for national statistics and to ensure that we have a genuinely independent national statistical service—as the 1997 Labour general election manifesto promised. I commend to the House last year's excellent report of the Statistics Commission, Legislation to Build Trust in Statistics. Its title says it all: a proper powerful statutory commission— accountable to Parliament—is long overdue to protect the independence and integrity of our national statistics.

7.24 p.m.

Baroness Noakes

My Lords, my noble friend Lord Marlesford has selected an excellent topic for today's debate. Doubtless the inclusion of the words "official statistics" has frightened off all but the most hearty Members of your Lordships' House—but the small number of us here has been more than made up for by the quality of the debate.

I cannot claim any competence in statistics, unlike the noble Lord, Lord Oakeshott of Seagrove Bay. As many people know, my own background is in accountancy and while statistics might seem to be a near cousin of accountancy, being based on numbers, I can assure noble Lords that they are quite different. Interestingly, the way that accounts have developed— particularly in this country, with clearly defined bodies of rules and independent regulatory frameworks—means we have achieved a high degree of trust in financial statements, whether those of the public sector—of government departments and so on—or of private sector companies.

When we come to statistics, while we can find a body of rules—we have UK rules, European rules and international rules; there is no shortage of rules—what we do not have is a properly independent regulatory framework for statistics in the UK. It will be known that my party is the party of deregulation; we would not lightly look to a regulatory solution to a problem. That is true whether we are talking about the public or the private sector. Yet we are firmly of the view that the integrity of our national statistics requires something to make it more accountable and transparent. That is why we have proposed our framework for statistical accountability, which I shall return to in due course.

I should like to rehearse some of the problems that have arisen with our national statistics. At heart, there is a justifiable concern that statistics in this country have become intertwined with politics, and that is damaging. My first example is pensions—an issue already referred to by my noble friend Lord Brooke. A couple of years ago, the ONS suddenly reduced the amount of pension funds by over £100 million without explanation. When challenged by my honourable friend David Willetts, they withdrew the statistics for three months. When they re-released their statistics, they showed that in 2001 this country was saving £86 billion a year—around 9 per cent of GDP—which was simply not credible. The figures were reviewed again and came down to £43 billion—virtually halved. Since then, they have been reduced even further.

That is had enough. However, even though the ONS warned, when putting out its £43 billion figure, that there were 30 more areas that needed work, the Government selectively used the statistics in their pensions Green Paper to state—not once but three times—that pension contributions had risen by 40 per cent between 1997 and 2001. That was part of the "Pensions crisis? What crisis?" stance that the Government were taking then and, to some extent, continue to take. They were so desperate to get some statistics to back the "no crisis" story that they wilfully ignored the known problems with the statistics. So the case of the missing pension contributions was in part an issue of how good the statistics were but really, and importantly, that was also in part an issue of playing politics with numbers. Neither aspect reflects well on the robustness of statistics in the UK.

My second example of where statistics and politics fall over each other is health productivity. Here we see some of the problems that arise when responsibility for statistics is dispersed—some held in the ONS and some in the Department of Health. The Government have poured money into the NHS since 1998 and it is of course a matter of great public importance to know whether that money has been well spent. The Department of Health used to publish a cost-weighted activity index in its annual departmental report, which showed a splendid story throughout all the years that Conservative governments had care and custody of the NHS. However, from 1998 onwards, it started to show that NHS efficiency was negative. By 2002 the annual loss of efficiency was around 8 per cent each year. It was no surprise, therefore, to find that the Government stopped publishing the figures in the Department of Health's annual report.

The ONS figures for public sector output and productivity told the same story—that money going into the public sector generally was evaporating without producing anything. Nowhere was this more true than in health and education. We know that the Prime Minister called a meeting in 2003 and urged that, a change to the definition of productivity was vital". The head of the ONS was at that meeting. It was no surprise that a review of public sector productivity, led by Sir Tony Atkinson, was then announced. He has now reported, and even his analysis has yet to produce any different view of productivity. The NHS still shows up as a place where productivity goes backwards.

The Department of Health's response to statistics about NHS performance has been unhelpful throughout, or at least since the department's figures started to paint the truth in a way that Ministers found unpalatable. My noble friend Lord Brooke has already referred to that. For example, getting answers to questions about health efficiency has been near impossible. I have been experiencing the same difficulties as my noble friend Lady Byford in trying to get reliable statistics about an area in which we have a policy interest. For example, rather than giving answers, the Government constantly claim that the statistics do not show quality improvements. They conveniently forget that neither do they show the 5,000 deaths each year from M RSA, or the impact of the failure to meet cancer targets.

The most recent example of problems with our national statistics has already been raised by several noble Lords. It is the decision, apparently taken by the ONS but not yet promulgated officially, to reclassify expenditure on the repair of roads from current expenditure to capital expenditure. We shall need a full debate on the substance of that in due course. I will just say now that the timing of the decision and its content are, to put it mildly, politically convenient for the Chancellor, to whom the ONS reports. It will join the decisions, already referred to by my noble friend Lord Northbrook, to put foundation hospitals on the public sector balance sheet, but keep Network Rail off the public sector balance sheet, as matters that have more than a whiff of political intervention about them.

It is against this background that my party has proposed a genuinely independent statistics service. The pivotal element of our proposals is a national statistics office headed by a national statistician who would be accountable directly to Parliament and not to Ministers. The national statistician and his staff would prepare the national accounts and other reports on the economic and social condition of the country, but would not itself carry out data collection and publication across Whitehall. The national statistician would prepare a statutory code of practice applying across Whitehall, and he and his staff would have a power to audit compliance with that, which is absent from the current arrangements. Government departments would no longer have a free hand to collect and publish what they want; it would all have to be approved by the independent national statistics office and the national statistician. The fundamental model is that of the Comptroller and Auditor General and the National Audit Office. The national statistician would be accountable to Parliament and would thus be independent from Government both in fact and in appearance.

As has already been pointed out today by several noble Lords, the key issue is trust—not just trust in the numbers that are bandied about, but trust in government. Trust is a rare commodity in public life at present, and we know that trust has been damaged in the past eight years. The Government's own creation, the Statistics Commission—a non-statutory quango—has helped to get some of the issues in the open, but it too believes that a more robust statutory framework is necessary, and the Royal Statistics Society agrees. That is in essence what we have proposed, and we have already published a draft Bill to show how it can be done.

I hope that the Minister will not be in denial this evening. I hope also that he will not simply defend the status quo or point to some magic such as the Atkinson review to solve all the problems. I invite him to join in an all-party consensus and to commit the Government to putting our statistics service on to a proper independent footing with statutory powers and proper independence from Government, so that we can have a new start in untangling numbers and politics.

7.35 p.m.

The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Lord McIntosh of Haringey)

My Lords, I know that I should not say this, but I was disappointed in this debate. The subject of the debate as on the Order Paper was so interesting and so important—the adequacy of official statistics for the determination of policy. I thought that there might be some constructive contributions as to the way in which statistics might be made more adequate for the purpose of the determination of policy. We discussed some interesting issues: the issue of public trust in statistics; a number of particular difficulties that have occurred in statistics over the past few years; the organisation of statistics; and the independence of the statistics office. All of those are interesting and to some extent important, and it is my duty and pleasure to reply to that debate, but I would have liked the debate to be more about what we could do.

I agree profoundly with the opening remarks made by the noble Lord, Lord Marlesford. Unless we have a sound statistical basis for policy—not just statistics in the sense that we have been talking about it but in my sense survey statistics as well—we are simply not going to be making the best possible decisions. I would like to have seen us debating the way in which some decisions taken in government—all governments, not just this Government—have been hindered by bad statistical decisions. There has been no suggestion of that at all. I am sad, and I am disappointed; but I will soldier on as I always do.

On the issue of the organisation of statistics, the facts are well known, and the noble Lord, Lord Northbrook, fairly referred to them. We knew when we came into office in 1997 that the trust in statistics was low. That is why we overhauled the system and established the framework for national statistics, which became operational in 2000; and that is why we had the objective of ensuring the quality of official statistics, guaranteeing freedom from political interference in their compilation and presentation. That is why we supported the independence of the National Statistician. By the way, he may be appointed by the Chancellor, but he is appointed under Nolan principles, which were not current under previous administrations. That is why we set up an independent Statistics Commission, as well as setting up the independence Office for National Statistics. The framework set out the role of the National Statistician as both the head of national statistics and the director of the ONS. It set out the role of Ministers in relation to the National Statistician, the ONS, and the Statistics Commission.

In his characteristically distinguished contribution, the noble Lord, Lord Moser, said, "Of course you have to take into account the statistics that are produced by departments as well"—and that is true. He made some helpful suggestions about those individual department statistics and the need to strengthen the Statistics Commission. The noble Lord, Lord Oakeshott, made some helpful comments on that as well. The most important point that he made, which is a criticism of the Conservative proposals, is the need to keep analysis with data collection. I am somewhat of a cookbook statistician myself. All of us involved with survey research are pseudo-statisticians rather than the real thing—except when we read the classic text by the noble Lord, Lord Moser, I think from 1953. It was my leading text.

We have proposals from the Conservative Party that in many ways echo the changes that we actually introduced five years ago. They say that there should be a national statistics office established by statute; that is what the Statistics Commission says and it has to be taken seriously. The Conservatives want that office to report directly to Parliament, about which there are difficulties. They want it to separate the collection of raw data from the analysis of all available official statistics, and to publish analyses and reports based on them, with a separate social and business surveys office headed by the Registrar General.

There is nothing very radical about that. Everything said in this debate will certainly go into the review envisaged by the framework for national statistics in 2000. It was said that there would be a revision in five years—in other words, during this year. That revision will take place. The Royal Statistical Society has already been involved. The Statistics Commission has already made its suggestions, which have been quoted today. I want to take the whole of the debate as evidence for that review, and certainly the contribution of the noble Lord, Lord Moser. To that extent. I very much welcome the debate.

The second issue discussed was public trust. I was puzzled by the noble Lord, Lord Marlesford, saying that t here was survey evidence that people did not trust official statistics. There is; there is survey evidence about distrust of all sorts of things—politicians, journalists, estate agents and so on. It is a worrying fact, because we wish statistics to be trusted. However, in this Chamber, surely our concern should he above all with whether it is objectively true that the statistics are to be distrusted, not whether people think so. The noble Lord simply said, "People don't trust them and I think that they're right", but he did not give any evidence for that assertion. People ought to trust statistics; I think that they are trustworthy. I am prepared to debate that issue at far greater length than I have available.

The third element in the debate was criticism of particular statistical issues. I am happy to respond to those, but I shall not take them in the order in which they arose. I shall deal first with pension contributions. David Willetts drew blood; there is no doubt about it. There had to be very significant revisions of the estimates of pension contributions. It is common ground that pension contributions are difficult to measure. Successive legislation made the pension industry more complicated—products changed, but old products remain in the market. There is no consistent accounting in companies themselves. After all, the information comes from companies; it is not collected from the public sector. There is no consistent way in which group personal pensions are regarded as company products by some insurers and as personal pensions by others.

The problem is enormously difficult, and the Office for National Statistics had to withdraw the figures for a considerable period, which is an embarrassment. The questions then have to be asked, "Does that matter? Has it actually made any difference to public policy?". Throughout the passage of the then Pensions Bill through Parliament, I did not hear any suggestion that the volume of pension contributions had affected policy in the area.

Baroness Noakes

My Lords, I have a question before the Minister leaves pensions. I also raised with him how government Ministers used statistics in a way that was not consistent with their underlying worth at the time, as noted by the ONS. The issue was how politics and statistics were pulled together. Will the Minister say something on that?

Lord McIntosh of Haringey

My Lords, that is not the subject matter of the debate. I shall come to the point with particular reference to health, but I shall press on to road maintenance, which was referred to by the noble Lords, Lord Northbrook and Lord Oakeshott.

Let me assure the noble Lord, Lord Oakeshott, straightaway that the initiative was that of the ONS. It identified a double count in the current expenditure. That is due to the difference between resource accounting and the national accounting frameworks. Before the change the national accounts had included both a depreciation charge, calculated by the perpetual inventory model, and the capital maintenance charge, as reported in the Highways Agency's accounts. You could not have both, so one had to be left as revenue. and the other had to be converted to capital. That will all be explained in a document to be published on 28 February. I am sorry that it is not possible to alter the publication of ONS documents to suit the convenience of this House. Even if we were able to influence the ONS—we are not, because it is independent—we would not seek to do so.

In any case, the double counting had to be remedied. It is a matter for the Office for National Statistics. The press release in which it described it has been published, and a website is available, but I certainly cannot read it out. I assure the noble Lord, Lord Northbrook. that everything is entirely transparent. The role of the Treasury in the matter was only as the provider of data for the reanalysis, not in either instigating or influencing how the inquiry was carried out. I noticed that he quoted last Saturday's Financial Times; he will find a much more perceptive article in the Financial Times today that explains the matter.

I move on to health statistics and public sector productivity. I have said on many occasions from this Dispatch Box roughly what the Health Secretary said and was criticised for saying by the noble Lord, Lord Brooke. The method is rubbish; not only that, it is counter to what common sense would tell us. The example that I have always given is that, if you reduce class sizes and have better quality information, it shows up as no change in a school's output and therefore as reduced productivity. All in-patient hospital procedures had equal weight so, whether the problem was an ingrowing toenail or a heart and lung transplant, they counted the same. If you take steps to keep elderly people in their own homes with a better standard of life, that showed up as reduced productivity compared with putting them in expensive residential care.

The method was always rubbish, and is rubbish now. That is why we have appointed Sir Tony Atkinson to look at it. His report came out on 31 January. It is on that that we should rest our case. The noble Lord, Lord Northbrook, is entirely right to quote Sir Tony's conclusions, but I am sorry to say that the conclusions drawn by the noble Baroness, Lady Noakes, are way wide of the mark. We have been doing exactly the right thing with something that is simply no good.

Oddly enough, the paucity of examples of bad statistics has been a feature of the debate, so I shall conclude by saying something about the necessity for an independent Office for National Statistics, and the fact that it has to disagree from time to time with the Government and the National Audit Office. Such a disagreement is not a criticism either of the Office for National Statistics or of the National Audit Office. Above all, the role of the Office for National Statistics is to reconcile what data we have with international accounts. Those international accounts are, in turn, influenced by international accounting conventions. They follow well documented standards used by the IMF, the OECD and the European Union, and they are compiled on a legal basis following the 1996 regulation from the Council of the European Union. That is why there are differences between statistics produced by departments for different purposes. On occasion, there are differences between the statistics produced by the Treasury for its own purposes, but there is nothing sinister about that. It simply means that the national statistics, which are the function of the Office for National Statistics, are a peculiarly difficult but very worthwhile area.

I have to say that if this was a Conservative debate in the run-up to a general election, it has not drawn blood.

7.50 p.m.

Lord Marlesford

My Lords, I am sorry that the noble Lord, Lord McIntosh, is disappointed with the debate. I am not entirely surprised because, after all, we tend to look to the reality of the world and try to form policies that fit it. Of course, as the noble Lord said several times, with his interest in surveys he represents a party which tries to do everything through focus groups. We are going rather wider. I hope that tonight we have had the opportunity to put the Government on notice that we are fairly dissatisfied with their making of statistics and we shall draw attention both to that and to other relevant factors in the poor governance which results from time to time. Meanwhile, I thank all noble Lords who have taken part in the debate and I beg leave to withdraw the Motion for Papers.

Motion for Papers, by leave, withdrawn.