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The media is wrong about UK GDP growth - here are the facts

The media is wrong about UK GDP growth - here are the facts

I'll share with you verbatim what I said to Tim on Slack just now...

'We need to allocate ad spend to simply improving knowledge - not even caring about return on investment. Have ad spend for conversions, sure, but seriously, how can we have such a massive failing from government communications AGAIN? People think the UK is doing awfully because of a GDP fucking methodology change?'

Did you know UK GDP during the pandemic was only the worst in the G7 because of this methodology change?

Probably not.

I think we suffer from Tall Poppy Syndrome here - we don't really like to say we do things better than others.

We effectively measure GDP growth more precisely than other countries, but we shot ourselves in the foot over the pandemic since the methodology change was brought in around then - there's definitely an argument for UK policy makers and institutions being stupidly brain dead with their timing, but trying to do things the best they can...

So let's talk about this methodology change then...

Here's a short explainer from Simon Briscoe...

The case for the UK having different methods starts a decade ago, when poor management and relocation out of London harmed the data collection and compilation activities of ONS, leading to errors. The Bean Review, published in 2016, was a response to this mess and led to many changes. The effort to get things “right” in recent years may have meant that planned improvements to the measurement of public sector output – in essence, to rely more on outputs (such as operations in hospital) than inputs (such as staff employed by hospitals) – to have been implemented faster or more assiduously in the UK than in many other countries.

That’s good but leaves the UK figures no longer comparable with most other countries. Indeed, if a country uses purely inputs (money spent) to measure health output, it might well have risen in 2020 as additional funds were thrown at the problem. Indeed, the majority of European countries are showing higher output now than a year ago.

So basically, because we changed the methodology of public sector inputs to outputs at a bad time, when schools were shutting and hospital operations not going ahead to focus on those coming in due to the pandemic...

It showed our GDP to fall MORE than countries that do not measure GDP in this way.

In essence then, we are more honest than other countries, and certainly more honest than Eurostat statistical analysis...

For example, the ONS has a bit of a jab at the European stats body here...

One of the main recommendations was that direct measures of output should be used in the measurement of non-market output, seeking “to measure what is achieved by spending on public services”⁵. Eurostat explains that the implementation of policy responses to reduce the spread of the coronavirus pandemic have had impacts on the production of non-market output (PDF, 75KB), which NSIs would have to consider in compiling the National Accounts. For example, it highlights how sum-of-costs would be impacted if the government continues to pay the normal compensation of employees, even though employees might be working shorter hours or not at all. In this case, the measured output in current prices would be largely unchanged, even though activity is clearly reduced, so affecting volume estimates. It also explains the importance that volume indicators “cover the new services that have been introduced because of COVID-19, as well as existing services that have been significantly expanded or reduced”.

Here's actually a fantastic video on the issues with GDP statistics from Charlie Bean who co-ordinated the change in UK GDP statistics in 2016, ironically leading to the current issue (as I said, it wasn't a bad change, it was just mistimed)...

I think one of the biggest issues with policy making not just in the UK but globally is their complete disregard that their communications are total dogshit.

I guess this is kind of where Macrodesiac steps in and gives us a good space to chat to you in language that doesn't make you think you've dropped two tabs of acid and jumped into a textbook on nuclear physics.

Like, Andy Haldane wrote a paper on central bank communications are bad for policy transmission, since they just don't know how to talk normally to the general public...

Yet they (in this case the ONS, but also the BoE) still don't communicate something so massive as a GDP methodology technicality being a reason for the charts below.

The UK economy is now 0.3% larger than pre-pandemic...

But the big question to ask here is how much bigger would it have been if the methodology were equal with the other G7 nations?

There was a calculation from Simon Briscoe above that meant the UK economy would have declined by 16%, not the 22% registered by the new methodology.

A 6 percentage point difference is huge...

And do you know what pisses me off?

This dogshite from FullFact...

Ah, with a lovely little tagline at the end...

Guys, it's a pretty big fucking difference.

And yet the media would run with this like it doesn't really matter, causing fear, self loathing and letting the idiots run with false narratives.

And the data actually gets more murky on cross comparison when you read the below...

In my view, we need to be MORE dishonest here, because we are being laughed at but idiots everywhere who think they're doing amazingly well, when really they're relying on China level of statistical honesty.

/End Rant.

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