Disruptive Ideas: A Statistical Test of Independence – Richard Marsh

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Reform Scotland is delighted to have the opportunity to publish a series of essays for the Melting Pot which seek to stimulate debate around economic policy in Scotland. The essays are based on ‘Scotland’s Economic Future: Disruptive Ideas’ paper series.

‘Scotland’s Economic Future: Disruptive Ideas’ is a paper series conceived and coordinated by Alison Hunter and Fabian Zuleeg. Together with a group of economic experts, policy analysts and commentators from Scotland and beyond, the papers have been developed entirely on a voluntary basis. Each paper presents the views of the individual writer concerning Scotland’s economic future at a time of significant global and domestic change and uncertainty. While covering a wide range of topics from institutional reform to immigration, the papers share a vision for Scotland to make greater strides towards a resilient, economic future.  The papers aspire to the following aims:

  1. To generate a fresh, apolitical and inclusive debate concerning Scotland’s economic future
  2. To support the process of new / revised policy adoption and new ‘ways of working’ which can be injected into Scottish life and society, with the aim of generating a better future for all of Scotland’s citizens
  3. To focus – at least initially – on a core set of themes linked to Scotland’s economic development and to inject ‘disruptive’ thinking into the debate

We hope that you will find our content interesting, thought-provoking and worthy of wider discussion across Scottish society, such that the significant efforts from our contributors might be seen in future change and action across related economic policy fields. Please do not hesitate to get in touch with the individual contributors or the paper series coordinators if you wish to discuss further. And please do share with colleagues.

Alison Hunter and Fabian Zuleeg 

A STATISTICAL TEST OF INDEPENDENCE

Since devolution there has been an increase in the demand for data to support the evaluation of Scotland’s public policy choices and the delivery of public services.  However, this demand has exposed significant gaps in the availability of data and the Scottish Parliament’s economy committee recently highlighted a precipitous fall in the number of formal evaluations of economic development initiatives.

Responses have sought to patch these gaps rather than take a wider view of Scotland’s future data needs.  Indeed, if Scotland’s statistical system were to be designed from scratch it would almost certainly look very different than it does today.

Without a fundamental change in the way we produce data in Scotland we are likely to find ourselves reheating old data to try to answer new policy questions.  Scotland needs to establish an independent Scottish Statistics Agency that is imaginative, agile, forward looking and customer focused.

The Agency should be led by a Chief Statistician in Scotland who should be independent of the government of the day and free to interpret the data needed to support and measure government policy.  Countries similar to Scotland operate independent statistics agencies and have already achieved much of Scotland’s stated vision of data leadership.

The Bean Review invites a fundamental rethink about the way we produce economic statistics. It is important that Scotland takes up this challenge and looks at new approaches to develop the next generation of economic statistics.  This is particularly true when considering the need to blend economic data with wider environmental and social outcomes to measure the effectiveness of public policy choices.

The Scottish Government’s Data Delivery Group currently falls short of this aim.  The creation of the Scottish Fiscal Commission demonstrates how it is possible to establish an arms-length scrutiny body to produce economic statistics.  The Commission was established relatively quickly at minimal cost and has served to significantly increase the scrutiny of government spending and public policy choices.

The Digital Economy Act (2017) will provide the Office for National Statistics with improved access to a range of economic statistics collected by Her Majesty’s Revenue and Customs (HMRC) covering employment, wages, profits and exports. The vast reservoir of microdata available is an underused resource and cries out for the kind of change in culture advocated by the Bean Review. 

At first glance the introduction of an independent statistics agency could barely be described as a disruptive idea.

The First Minister suggested earlier this year that health and wellbeing were as fundamental as GDP. There is, therefore, a clear need to support this vision with relevant and reliable data. 

It is, equally, entirely plausible that it would be more appropriate to measure GDP taking into account the consumption of natural resources.  Scotland, too, needs to keep pace with this agenda, reflecting the Scottish Government’s commitment to addressing climate change through a wide range of measures.

The role of data here could signal a game-changer in how Scotland moves forward with this agenda. Additionally, the Scottish Government has arguably produced some of its most policy relevant information when it has produced publications that don’t seek to copy an existing UK publication or statistics. 

Establishing an independent statistics agency would provide a platform to generate statistics that best support the evaluation of Scotland’s public policy choices and the delivery of public services.

Evidence-based policy should start with a focus on the policy choices facing Scotland, the key questions about the delivery of public services and what information is needed for meaningful monitoring and evaluation.

Currently there is a tendency to sift through administrative information and long-standing surveys and ask to which policy questions they could be applied.

While the call for evidence-based policy making has been persistent since devolution, too often we end up with policy-based evidence.  Without full consideration of how data is produced to inform and evaluate public policy it is likely that key policy choices will continue to go unmeasured with a poor sense of progress or direction.

For example, a review of Scotland’s £5.2 billion city deals by Audit Scotland found that the Scottish Government does not have a plan to measure their success.  Additionally, a data deficit can incentivise a rather limited approach to policy making, where the status quo offers the least risky response in a context of limited evidence of different policy options and outcomes. 

The are advantages for the Scottish Government as both a user and producer of national statistics.  This includes the ability to publish economic statistics without prior notice, the ability to withdraw or delay some economic data publications.

However, the Scottish Government is as likely to benefit from an independent statistics agency as those seeking to hold the government to account.  Scrutiny of the UK government’s analysis would be significantly strengthened by the more prominent voice of an independent Chief Statistician and an independent Scottish Statistics Agency.

An additional argument can be made here: by having an independent agency, questions of timing and availability of data are no longer subject to accusations of narrow political gain.

Regardless of Scotland’s future constitutional status, having an independent Scottish Statistics Agency and Chief Statistician, would inform and improve the quality of public debate.  This would provide the necessary foundations for evidence-based policy making in Scotland.

Richard’s full paper can be read here.

Richard Marsh is director of economics at 4-consulting, he is an economist specialising in regional economics and economic statistics. Richard contributed to the First Minister’s Sustainable Growth Commission, working on the economic value of migration.