BIS Review 71/2004  5  This was already in hand when the Chancellor of the Exchequer commissioned Chris Allsopp, a former member of the MPC, to assess how well the ONS’s provision of statistics matched the needs of policymakers. The Allsopp Report, published earlier this year, has recommended some fundamental changes to the way that key economic data are put together. These concern regional and service sector data; and the ONS’s capacity to respond to changes in the structure of the economy. First, Allsopp recommends that the national statistical system should be reoriented to produce better quality regional data. This is likely to involve, for example, establishing an ONS office in every English region – not dissimilar to the Bank’s Agency network. The ONS’s main business surveys are also to be expanded to obtain greater regional coverage. For example, the Annual Business Inquiry - a major workhorse of economic statistics, which provides detailed information on, for example, employment, production and investment – is likely to be trebled in size. Monetary policy operates at the level of the whole economy, and cannot target particular regions or countries of the UK. But to the extent that better measurement and understanding of regional activity leads to improvements in the quality of UK national statistics, as the Allsopp Report expects, this development will improve the information base on which monetary policy is founded.
Over the past ten years, revisions to services output have accounted for more than half of the average revision to GDP growth; and around four-fifths of the variance of GDP revisions can be attributed to revisions to service sector growth. Indeed, research by Bank staff has indicated that the private-sector business surveys may give a better guide to the ONS’s estimate of service sector output growth two years or more after the event than do the ONS’s own early estimates. (In contrast, the ONS’s early estimates of manufacturing output growth clearly outperform the business surveys as a guide to later estimates.) The ONS is well aware of this imbalance. In fact, it has been at the forefront of developing and improving measures of service sector output: within the OECD only the UK and Korea produce a monthly Index of Services production, the counterpart to the well-established monthly Index of Production for the industrial sector. The Allsopp Report should give further welcome impetus to this work. The third focus of the Allsopp Report is the capacity of the ONS to identify and respond to structural change in the economy. The make-up of UK economic activity is constantly changing. Fifty years ago, the manufacturing industry accounted for about one-third of UK output. The service sector made up less than one-half. Today, the corresponding shares are less than 16% for manufacturing, and over 70% for services. Responding to this sort of change is challenging.