It doesn't seem to be widely realised how narrow are the uses that can be
made of national income statistics or how misleading they can be.

The function and purpose of NI statistics is to help manage the economy on a
year-to-year basis, and the value of these statistics for any other purpose
is more or less a matter of chance.    A major example is the treatment of
education.   Blair got in chanting 'education/education/education', and
continues to give lip service to the economic importance of education.   But
he now has a crisis on his hands because education is not classified as
investment (seen by the globalised financial world as a good thing) in NI
statistics, but as public expenditure (seen by the world as a bad thing).

Investment in NI terms means investment in physical assets - plant,
machinery and buildings.  Called GDFCF - Gross domestics fixed capital
formation.   If the NI statisticians are doing their job and there is no
good reason to think otherwise, expenditure on building new hospitals is
classified as GDFCF.   In the Blue Book I have to hand (rather old) it
appears to be included under the heading 'Heath services' in a table headed
'GDFCF by industy and  type of asset'.

How that expenditure is financed is another matter.   And how PFI is treated
in the NI accounts may be as difficult to ascertain as the mechanisms of PFI
itself.

Ray Thomas
35 Passmore, Tinkers Bridge, Milton Keynes MK6 3DY
Email: [log in to unmask]
Tel 01908 679081  Fax 01908 550401
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----- Original Message -----
From: "Allan Reese" <[log in to unmask]>
To: <[log in to unmask]>
Sent: Saturday, November 29, 2003 7:17 PM
Subject: UK Blue Book Statistics


> I have been helping to analyse time-series data from the Blue Book (cf
> advertised workshop "How UK governments divide your money").  One point
> that has been vexing us, and was brought up in the workshop, is what
> the reported figures actually mean, if anything.  For example, reported
> capital spend on health has been negligible since the mid 90s because
> new buildings are funded by PFI and so appear as interest payments in
> the current account.  Does this make a nonsense of claims to be
> "investing in health"? What other accounting practices (ie fiddles) are
> implicit in the official figures?  Do they, indeed, support a
> meaningful examination or merely confirm Stamp's Law?

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