DAN ATKINSON: Didn¿t the ONS do well? Well, not really

| July 29, 2012 | 0 Comments

Dan Atkinson

16:14 EST, 28 July 2012


16:14 EST, 28 July 2012

After the dark clouds of last week’s dreadful economic growth figures, maybe we will see a ray of light tomorrow.

At the very least, we may be persuaded that a shrinking economy and squeezed living standards are not the whole story, and that when you add up what was once called the social wage – the cash value of assorted public services – then we are better off than we thought.
How does it work?

Well, once a year the Office for National Statistics produces a report that shows how much income we receive from various sources (salary, dividends, pension and so forth), and then adds in all the cash benefits provided by the State.

Danger: Assigning a value to something, as the NHS, simply on the ground of what it cost

Danger: Assigning a value to something, as the NHS, simply on the ground of what it cost

It then deducts all the different
taxes (including VAT, television licence and so on), leaving a post-tax
Finally, and this is where we came in, it adds what it reckons to be the
money value of services such as schools, the National Health Service
and bus and railway subsidies.

For the population as a whole, these
benefits added £7,089 to post-tax household income last year, taking
the grand total to £32,127.

Tomorrow, the ONS will publish an
article detailing how it arrived at these money values. Should you be
convinced by its explanations, you will presumably feel a fair bit

One obstacle to this instant feelgood
factor is obvious. To have an (albeit independent) Government agency
inform you of the cash value of public services is rather like when you
first went out to work and your mother swiped a chunk of pay for
housekeeping, declaring living at home to be ‘cheap at twice the price’.

Concern may deepen on examining what is already published about the ONS’s methods.

How, for example, does it figure out what the NHS is worth? Pretty much by working backwards from what the Government spends on it.

True, there are weightings for age
and types of households, but this looks very much like assigning a value
to something simply on the grounds of what it cost.
It is the same story with education and with housing and travel

Baldest is this statement regarding
what free school meals are worth: ‘The value of free school meals is
based on their costs to the public authorities.’

The danger with all this is that the more that public bodies spend, the more valuable their services are deemed to be.

Furthermore, only limited account is taken of the substantial number of people opting out of these services.

No ‘benefit’ is recognised from
independent schooling, while: ‘No allowance is made for the use of
private healthcare services.’

This is the economics not of Maynard
Keynes or Milton Friedman but of Sir Bruce Forsyth, forever declaring:
‘Didn’t they do well?’
Perhaps. But not on this evidence.

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