Sir Andrew Dilnot CBE
Chair – UK Statistics Authority
1 Drummond Gate
13 September 2013
Dear Sir Andrew,
I am writing to ask the Office of National Statistics (ONS) to look at whether official estimates of gross and disposable median household income, and distribution by decile, could be published on a more frequent and timely basis.
Currently the ONS publishes first estimates of quarterly GDP within a month of the end of that quarter. Estimates of total household incomes are included in the quarterly national accounts before the end of the following quarter, which makes it possible to calculate changes in GDP per capita and mean household income.
However, as you will know, aggregate and mean average figures tell us nothing about how national income is actually distributed. They do not allow us to ascertain whether the growth of the economy is being reflected in an improvement of living standards for the majority, or whether inequalities are narrowing or widening.
Currently official data on the distribution of incomes is collected in the ONS’s Living Costs and Food Survey. However, judging from the latest editions, figures for the distribution of gross household income are not published till almost a year after the end of the relevant calendar year, in the publication Family Spending; while figures for the distribution of disposable household income are not published for more than a year after the end of the relevant financial year, in The Effects of Taxes and Benefits on Household Income.
Thus, to illustrate, we now know by how much GDP grew in the second quarter of 2013. But for ONS data on how this growth is being shared, and the extent to which it is benefiting typical families, we will have to wait until the Family Spending publication for 2013, publication of which would be expected at the end of 2014, and The Effects of Taxes and Benefits on Household Income, 2013/14 which would be expected in July 2015.
The final report of the LSE Growth Commission, which brought together leading economists and business leaders, proposed “reforming the way we measure and monitor changes in material wellbeing and its distribution, including regularly publishing median household income alongside the latest data on GDP”. This was informed by their conclusion that “prosperity is strengthened when everyone has the capacity to participate effectively in the economy and the benefits of growth are widely shared”, and that “monitoring developments in median household income would be a particularly valuable way of gauging the inclusiveness of the growth that is generated”.
Meanwhile Sir Tony Atkinson has argued that “the starting point [of macro-economic policies] should be the living standards and well-being of individuals and their families” and that “the adoption of distributionally adjusted equivalised household disposable spendable income as the headline indicator can make a significant difference to the way in which we view economic performance”. And the 2009 Report of the Commission on the Measurement of Economic Performance and Social Progress led by Professor Joseph Stiglitz, Professor Amartya Sen and Professor Jean-Paul Fitoussi argued that “while it is informative to track the performance of economies as a whole, trends in citizens’ material living standards are better followed through measures of household income and consumption”.
I recognise of course that these statistics are based upon complex survey data and a lot of careful work is entailed in producing them. But I believe that public debate and government policymaking would be better informed and orientated if more frequent and timely estimates of the distribution of disposable income among households could be made available, so that this can be monitored alongside the aggregate growth in national income. As you know, there is widespread concern that economic growth is not benefiting ordinary working families who are still facing a cost of living crisis. Timely data on median household incomes would help policy makers respond to more recent developments.
Therefore, I would be grateful if you would ask the ONS to look at the feasibility of publishing estimates of gross and disposable median household income, and distribution by decile, on a more frequent and timely basis.
Rachel Reeves MP
Shadow Chief Secretary to the Treasury