The numbers suggest that, during Covid, Britain’s services have been outclassed by other countries’ – but the numbers might be wrong
Emerging GDP data in Britain is telling us one of two things – and both are shocking. Either the response of Britain’s public services to the Covid-19 crisis has been by far the worst in Europe. Or our GDP data, the main measure we have of tracking the economy, is distorted relative to many other countries.
First, the raw numbers. Public sector activity in the UK, as recorded by the great Eurostat database, fell by 23 per cent in the year to the end of the second quarter of 2020. That’s understandable, right? After all, that was when the pandemic took hold and brought many things to a shuddering halt.
Except, across the rest of Europe, only France and Hungary recorded falls of more than 10 per cent. Belgium, Italy and the Netherlands – also hit badly by Covid-19 – each fell by around 8 or 9 per cent. And Spain’s output was unchanged.
What’s more, the UK’s public services are proving slow to recover. Output was down 13 per cent over the year to the third quarter, but had fully recovered to the previous year’s level in France and the Netherlands.
If these numbers are right, the UK had by far the worst public sector response to the pandemic. Activities were stopped – and the public denied services, mainly in health and education – on a scale seen in no other country.
That’s a big if. Another entirely possible explanation lies in the calculation of the UK’s Gross Domestic Product. GDP is the sum of the nation’s output across all sectors, such as manufacturing, construction, banking – and public sector services including health and education. These crucial statistics are compiled according to internationally agreed rules to make them comparable between countries, but, in this case, the figures might not be comparable.
The reason for this reflects the chequered history of the UK’s oft-criticised Office for National Statistics. A decade ago, many of the nation’s official statistics were in a terrible state: poor management and relocation out of London led to 90 per cent or more of key staff leaving the office, which crippled the data collection and compilation activities in areas that are complex and technical, leading to errors. The Bean Review, published in 2016 as a response to this mess, led to many changes.
But the redoubled effort to get things right 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.
The impact on aggregate GDP of the UK’s “better” numbers could be considerable. The ONS figures suggest that the fall in public sector output accounted for over 6 percentage points of the 22 per cent fall in total GDP in the first half of 2020. In other words, over a quarter of the UK’s reported fall in GDP this year has, in effect, been attributed to closing schools and stopping hospital operations.
This might be accurate, but had the ONS assumed that health and education output was unchanged in the first half of 2020, on the grounds that inputs – staff employed – were unchanged, the fall in UK GDP would have been 16 per cent, not 22 per cent.
This is what some other countries may have done. Spain, for example, which has surely experienced at least as much disruption to public services as the UK, had unchanged public sector output in the first half of 2020. Is that plausible? Some other countries, such as Belgium and Italy, also hit hard by Covid-19, had very small reductions in health and education output. Had the ONS matched their fall in public sector output, we would have seen a fall in UK GDP of 18 per cent, not 22 per cent.
So we are left wondering whether the UK had an appalling public service response to the pandemic – or if the numbers are just misleading, leaving the UK with the undeserved label of the worst performing economy in 2020.
It is a scandal that the NHS stopped publishing much of its activity data during the pandemic when, if anything, more data was required. But, in the absence of that, it’s time for the ONS to speak to schools and hospitals, and to government ministers, to see if they share its view on “output”.
It’s also time for the statistics regulator (UKSA) to pass comment on the validity of these datasets and their uses, especially when it comes to international comparisons. They should assess all GDP elements: the health and education components leap off the page because of their size, but “improvements” in other series might also be depressing the figures.
It is bad enough that many countries do not publish excess death data and that we have no harmonised figures showing how many people have died of the virus. But to learn now that the main measures of economic activity are, perhaps, also not that comparable is even more disappointing. Application of the rules across countries is not as equal as the statistocrats would have us believe.
That said, if Britain’s checked and published GDP numbers are the best they can be and deemed robust and comparable by regulators, the health and education sectors need to explain why the public sector’s response to the pandemic in the UK was far worse than in any other country. It’s not a great situation, either way.