1. Producing economic statistics and advice for Scotland Highland Economic Forum October 2009 Sandy Stewart Senior Statistician Scottish Government Office of the Chief Economic Adviser

2. Contents Producing statistics and economic advice for Scotland Scottish Issues Sub-Scotland Data and Analysis Modelling Sub-Scotland GVA – output and income approaches Planning – looking to the future - discussion

3. Producing economic statistics and advice

4. Office of the Chief Economic Adviser Producing Statistics Short term indicators GDP Trade statistics GCS/IME SNAP National Accounts/ GERS/ Tax Modelling/ Budget advice Input-Output/ Impact studies and modelling Business Statistics Micro analysis/ IDBR/ABI/R&D Labour Market

6. Scottish Issues

7. Issue 1 – Meeting Users needs –Ministers – routine publications and ad-hoc demands – want more and earlier – statistical and non-statistical products –Council of Economic Advisers – recommendation 21 “the quality of economic statistics in Scotland does not yet meet the needs of government. We welcome the many steps which are being taken to improve the situation and have drawn special attention in this chapter to some of the areas which we believe should receive priority in these developments: the financial services sector the oil and gas sector depreciation and environmental statistics output prices, especially in the export sector the public sector alternatives measures to GDP” –Media and public – critical, but strong underlying political interest –Local knowledge – more extensive sub-Scotland analysis required

8. Recent press comments “This tardiness in the publication of Scottish Government (GDP) statistics is a continuing scandal” – Scotsman 21/4/09 “Scotland’s GDP numbers: An amazing case of statistical mince” – Scotsman 22/4/09 – criticism of chain-linking (Delphic mysteries) and seasonal adjustment (need peaks and troughs) But there were some anomalies in the GDP figures..” – Scotsman 23/4/09

9. Issue 2 – Dependency on UK data –reporting units not determined by geography –need for survey boosts (can be expensive!) –programme dependent on UK programme Purchases inquiry National accounts re-engineering –local considerations need to be balanced with national considerations –Allsopp developments welcomed – especially GVA(P)

10. Issue 3 – SIC 2007 Implications for all our statistical products Need for major (?) system re-writes No real scope for delays to publications Need to scope requirements and consider resource implications

11. Issue 4 - Resources Already over-stretched Vacancies – recruitment problems for qualified professional staff Tightening of budgets  Make better use of ONS methodology directorate (e.g. SNAP review of deflators) Need to work with others to “pool” information and peer review outputs.

12. Sub-Scotland data and analysis

13. ONS – Regional GVA – 1. NUTS3 geographies –Caithness & Sutherland, Ross & Cromarty –Inverness & Nairn and Moray, Badenoch & Strathspey –Lochaber, Skye & Lochalsh and Argyll and the Islands –Eilean Siar –Orkney Islands –Shetland Islands Annual data – 1995 – 2006 latest available.

14. ONS – Regional GVA – 2. Industries –Agriculture, Forestry and Fishing –Production –Construction –Distribution, Transport and Communication –Business Services and Finance –Public administration, education, health and other services. –Total GVA Income components –Compensation of employees –Gross Operating Surpluses

16. ONS Regional Gross Disposable Household Income

17. NOMIS – Labour Market Contents –population, working age population –employment, unemployment, economic inactivity –occupations, qualifications, earnings –benefits & claimants Employment x Earnings can be used to proxy Compensation of Employees – largest income component of GDP.

18. Modelling Sub-Scotland GVA – output and income approaches

19. Experimental GVA (output based) in constant basic prices for Highland Local Authority

20. Experimental regional GVA (1) Initial research determined that a ‘bottom-up’ approach using the source data used in the National GVA measure is not possible. –The samples are drawn to provide UK-level statistics –Taking a Scottish extract is not without its difficulties, notably business units spanning the border –Breaking this down further by L.A. leads to incredibly small and inherently volatile samples (and estimates). –The current panel-estimation approach used in manufacturing is completely incapable of producing regional (sub-Scotland) estimates.

21. Experimental regional GVA (2) Hybrid ‘top-down’ approach trialled (during 2007). The approach used 3 main data-sources: 1.Quarterly GVA (Scotland) – used as a National constraint for regional estimates 2.Inter-Departmental Business Register (IDBR) – provided employment growth by industry/L.A. 3.Annual Business Inquiry – provided benchmark levels of GVA by local authority in addition to regional labour productivity by industry. In essence, relative movements in ‘2’ and ‘3’ were used to apportion overall growth in ‘1’ to each region.

22. Experimental regional GVA (3) In short: –The estimates are artificial; modelled using a range of indicators not really intended to be used in this way. –No new primary data used in the estimates –Pragmatically, the best estimates that could be achieved with the current data –Some plausible results achieved, some less so Estimation never repeated after initial trial –Was clear that a vast amount of (IDBR) data-cleaning would be required for initial development –Ongoing requirement to actively track changes in IDBR employment against other non-statistical information (newspapers, news releases, local knowledge) to ensure that regional trends were plausible Would require a significant investment of resources with no guarantee of success.

23. GVA (Income approach) SNAP project – builds on Regional Accounts methodologies Currently produced as experimental statistics for Scotland – see SNAP website www.scotland.gov.uk/SNAP www.scotland.gov.uk/SNAP Proxy data for income components available locally – employment, earnings Modelling –combine output and income analysis where appropriate –augment with local knowledge

25. Planning – looking to the future

26. Topics for discussion OCEA need to know how our data are being used – or not used Need to understand how you use data from ONS, HMRC, OGDs Sharing local knowledge – peer review of outputs Need to collect supplementary data Need to develop a modelling framework