Introduction to the statistics

The statistics comprising the CRA are published as a series of tables in November each year for the financial year ending in the March of the same year. Earlier estimates are published in HMT’s Public Expenditure Statistical Analysis (PESA) publication in July. The National Statistics status of statistics in PESA was confirmed in 2012.

CRA statistics are widely used as the main source of country and regional spending data by analysts inside and outside government. It is a matter of great public interest, and very important for monitoring how new funding systems (fiscal frameworks) are operating to have accurate comparative measures of levels of spend on “devolved” services across the whole of the UK. For example, it is important to know, for those services that are devolved to Scotland what the comparative levels of spend on those services are in the rest of the UK, London, South East etc.

Judgement on National Statistics Status

Users value HM Treasury’s (HMT) Country and Regional Analysis (CRA) of government spending and regard the statistics as being of high quality and trustworthy.  We identify a range of actions for HMT to further enhance the statistics, detailed further in our Assessment Report. Once HMT demonstrates that these steps have been undertaken OSR will recommend that the Statistics Authority confirm the continuing designation of the statistics as National Statistics.

Key findings

Public Value

We find that the CRA presents statistics that people can rely on, allows them to compare Government spending across the countries and regions of the UK and provides useful guidance to help them understand the published information.

The strengths of the CRA statistics include:

  • the capability to manipulate the statistics in interactive tables, allowing those familiar with spreadsheets to conduct bespoke analysis based on the data
  • being the sole authoritative source for public spending per head in the UK’s countries and regions
  • that the framework used to create the statistics (the Total Expenditure on Services (TES) framework) is resilient to changes resulting from the creation or amalgamation of government departments or by programmes of work moving between departments. This is not the case when using the departmental budgeting framework

Whilst there are considerable strengths in the statistics, there is potential for them to offer much greater public value, particularly in the following respects:

  • the economic impact of public spending in the countries and regions is difficult to assess as the basis of the statistics is not focused on where the spending takes place but on ‘who- benefits’ from the spending, resulting from judgements rather than transactions. Users would like to use the statistics more intensively for economic analysis of fiscal effects, which rely on a ‘where-benefits’ breakdown
  • the presentation of the statistics lacks capability for ‘at-a-glance’ appreciation of the insights from the statistics by occasional users who are not very experienced in investigating the data. Occasional users may well miss important insights from the statistics as they are currently presented
  • the level of classifying spending is at quite a high level (for example, ‘transport’ or ‘health’ spending) and analysis at programme or individual service level (for example, spending on concessionary travel or Child and Adolescent Mental Health in regions and countries) is more difficult to establish. Users would like to compare spending across regions and countries on programmes and services closer to their interests
  • CRA is not presented by the source of public funds so spending from European Union or from local authority sources is not separately identified. This simplifies the presentation. However, Brexit is likely to affect public spending, but the nature and distribution of the effects are quite uncertain. It will be difficult to discern from the statistics alone what impact Brexit will have in the countries and regions without helpful analysis by the statisticians
  • the rationale behind decisions about the split between non-identifiable and identifiable spending on large projects can seem obscure and lacking in coherence. Without greater transparency there’s a risk to trust in public finances. People see taxes collected centrally, but without transparency might not see funds being divided between the countries and regions in a fair and equitable way. CRA can help signpost those interested in the ways large elements of spending are allocated to the explanatory documents

Quality

The data, coming from HMT’s public expenditure database, collate expenditure across the whole of public expenditure on a largely consistent basis across departments, within high-level categories. HMT adopts international standards to classify spending with as much disaggregation as possible (in some cases to what are referred to as ‘sub-functions’ or ‘segments’) while still maintaining international comparability. HMT acknowledges that the more granular the detail, the less accurate the data might be and is candid that its Education data at the sub-function level needs improving.

Despite the TES framework being more resilient to machinery of government changes[1] than the departmental budgeting framework, HMT makes changes to its guidelines and methodologies for apportioning expenditure between each CRA publication. Coverage and classification can differ noticeably between publications, which means building a consistent data series for years before those covered by the latest CRA publication is not always straightforward. Changes to accounting methods and methods of financing infrastructure over time have had effects on what is included and excluded in various categories, especially when looking at the capital and revenue spending. For example, building a road is capital spending, but paying shadow tolls as part of a usage agreement with a private sector company that built the road, is revenue spending. HMT comprehensively explains the main changes in each annual publication.

Trustworthiness

There has been well-publicised criticism of the statistics and their interpretation over the last 20 years[2]. Much of the criticism continues to revolve around the methods used to create the data, for example the use of the ‘who-benefits’ approach, allocating spending according to the recipient of its benefit. However, the users of the CRA we spoke to demonstrated confidence in the statistics. We have also had access to feedback from users of government spending and revenue statistics which use the CRA data, which has shown that users see the statistics as trustworthy as they are materially consistent with similar country and region spending statistics published by the Office for National Statistics (ONS) and by Scottish Government.

Next Steps

We expect the CRA statistics team to report back to us by 30 August 2019. Once HMT has shown us that it has enhanced the public value, quality and trustworthiness of the CRA statistics having fully addressed the findings and requirements described in our Assessment Report, the Authority will decide whether to confirm the NS designation, based upon OSR’s advice.

 

[1] Machinery of government changes are transfer of functions between ministers, or between a minister and a non-departmental public body (NDPB)

[2] For example ‘The Welsh Budget’ by Phil Williams (1998) and ‘Why economic data provided by London will not help the Scottish independence debate’ blog post by Richard Murphy (March 2017 accessed 21 December 2018) and ‘A Constructive Critique of the Treasury’s Country and Regional Analysis of Public Expenditure’ by Jim and Margaret Cuthbert

 

Related Links:

Ed Humpherson to Tom Orford, HM Treasury (May 2019)

“An investment in knowledge pays the best interest” – Steps towards transparent fiscal statistics (May 2019)

Systemic Review: The Public Value of Devolved Public Finance Statistics (May 2019)

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