POLITICS
Mr Lawson's not-so-vital statistics
NOEL MALCOLM
Anews item caught my eye last week when it surfaced briefly on the BBC, before relapsing into obscurity. The Gov- ernment, it was said, was planning to change the method by which the balance of payments figures are calculated; the new Method would yield (surprise, surprise) a much smaller figure for the overall deficit.
Labour spokesmen were quick to point to the Government's dubious record on the employment statistics, the compilation of which has been changed 11 times in nine years. Whenever this insinuation is made, the Government primly replies that the changes have been introduced only on the recommendation of the Civil Service statisticians. Last week's new item would seem to confirm this line of defence, since it almost certainly arose out of a leak from the Pickford Committee, which is currently preparing a report for the Government on the collection of official statistics. But of course governments can regard some re- commendations with more favour than others. We all know, for example, that the next statistician to propose to Mr Lawson a way of excluding mortgage payments from the inflation figures will be regarded with very great favour indeed.
The current political concentration on inflation and the balance of trade is en- couraging an unhealthy cult of statistics- worship. Each month, figures are issued which purport to show the latest tremor in the balance of trade to the nearest million pounds, and the latest microscopic growth- ring of inflation to the nearest one tenth of one percentage point. In each case, the pseudo-precision of the end result conceals a huge quantity of guesswork and some highly dubious procedural assumptions. Where the balance of payments is con- cerned, the bodging is made public every year through the use of the 'balancing item', which appears on the accounts as a euphemism for the enormous discrepancies which they contain. It fills in the gap, rather in the way that cartographers used to fill spaces in their maps with 'Here be monsters'. In 1987 the balancing item was a monstrous three and a half billion pounds.
This cult of precision is unhealthy, be- cause it promotes a false idea of just how closely governments can 'manage' national economies. It makes people think of the economy as a finely tuned machine brist- ling with nicely calibrated dials and gauges. In reality, however, while some bits of the machinery may have high-precision dials attached to them (such as base interest rates), other parts consist essentially of black holes tied together with string.
In principle, the proper Tory approach is one of scepticism towards anything that smacks of detailed economic planning, while the socialist approach (as exempli- fied by Vladimir Lenin and George Brown) is the exact opposite. But whenev- er Labour spokesmen such as Mr Tony Blair pop up on our television screens, they seem keen to show that their economic forecasting is derived not from socialist theorists but from those bright young City analysts who keep telling us what level of trade deficit, for example, the market is `looking for'. This new symbiosis of Wal- worth Road with the City of London may give Labour politicians the feeling that they are being refreshingly unbiased to- wards their moral inferiors — an inverted equivalent, perhaps, of slumming it. Or may just reflect the fact that Labour simply cannot afford to do its own in-house economic analysis and forecasting. Even card-carrying capitalists, however, should not believe everything they are told by the City. It is possible in principle to calculate the profits of a trading company to the nearest pound or penny; but it is not possible to do, this for a whole country, unless you tie people down and bar-code every move they make.
`Ah,' the statisticians will say, 'you can never get it exactly right, but you can always get it within an acceptable margin of error.' How big, one wonders, does it have to be before it becomes unaccept- able? Take job vacancy statistics, for ex- ample. These figures are arrived at by counting the vacancies at Job Centres and (wait for it) multiplying by three. Last year, when the fictitious total calculated in this way for Greater London was 90,000, a more detailed survey by the Department of Employment suggested that the true figure was in the region of 150,000 — a margin of error of a mere 67 per cent. Or take the balance of payments. Last year roughly 50,000 people emigrated from this country. The Goverment has no real idea what quantity of assets they took with them. Its estimates for this figure are derived first of all from a tiny sample of people who answered the International Passenger Survey questionnaire, and partly from archaic figures dating from the period of Exchange Control which have been `trended forward' to the present day. The resulting guess is that in 1987 each emig- rant took no more than £8,100 abroad. A study by two Oxford economists which has just been published by Shearson Lehman Hutton suggests that this is a gross under- estimate, and that the total annual outflow of emigrants' assets may now be as much as £5 billion.
Or take the inflation figures: a mare's nest of arbitrary assumptions, and well- meaning fiddles. The Retail Price Index does not, on principle, include taxation, but it does include rates. It includes some types of insurance but not others. For years it excluded contents insurance on the grounds that the moneys paid in as pre- miums were paid out again as claims; but it includes mortgage interest, where the amount paid in building societies by bOr- rowers is, broadly speaking, paid out again to savers. The inclusion of mortgage in- terest has always been blatantly irrational; no other form of credit charge is covered by the index, and while mortgage pay- ments are meant to stand proxy for 'hous- ing costs', it is quite possible under the present system for this part of the index to rise at a time when the cost of houses is actually falling. Besides, everyone (except the government statisticians) has known for the last 30 years or so that buying a house is a- form of long-term investment; and no other forms of investment are included in the index. It is an unfortunate irony that Mr LawSon should have started his campaign to remove mortgages from the RPI just at the moment when the argument about house-buying as a form of investment is beginning to crumble.
The Chancellor could do better than remove mortgages from the index — he could abolish it altogether. Or he could privatise it, making sure that its monopoly status was broken up. I should like to look forward to the day when there are as many conflicting versions of it available as there are competing Cassandras in the City.
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