Politics and statistics: a happy marriage?

1. Politics and statistics: a happy marriage? Peter van de Ven Head of National Accounts OECD World Statistics Congress, STS 045 Hong Kong, August 25-30, 2013

2. Overview • Administrative use of national accounts data • Pros and cons of administrative use • The case of the Excessive Deficit Procedure • Way forward

3. Administrative use of NA-data • GNI/GDP for the calculation of contributions to international organizations, ECB capital share, IMF-quotas, etc. • Regional GDP per capita for the eligibility of a region to EU Structural Funds • Government Deficit and Debt (Excessive Deficit Procedure) • More recently: Excessive Imbalances Procedure

4. Pros of administrative use • Considerable improvement of quality and international comparability, e.g. exhaustiveness of GDP-estimates • Improved transparency, e.g. availability of metadata • Growing prominence of statistics in general, and national accounts in particular • Focus on certain indicators provides single and clear message, e.g. government deficit and debt

5. Cons of administrative use • Increased allocation of resources to compilation of data for administrative use • Less inclination to look at other demands related to general economic policy and economic research • Discussion on recording of transactions and classification of units less balanced, decisions driven by impact on certain indicators • More inclined to being “exactly wrong” instead of “approximately right” => bookkeepers vs. economists • Political interference in defining and interpreting international standards

6. The case of the Excessive Deficit Procedure: general • Growth and Stability Pact: • Government Deficit < 3% of GDP • Government Debt < 60% of GDP • Definitions based on System of National Accounts • Procedure in case of disputed recording/classifications: • Formal advice from the Committee on Monetary, Financial and Balance of Payments statistics (CMFB), often based on previous work of a dedicated Task Force (http://www.cmfb.org/main-topics/excessive.htm) • Decision by Eurostat => Manual on Government Deficit and Debt (http://epp.eurostat.ec.europa.eu/portal/page/portal/government_finance_statistics/methodology/ESA_95)

7. The case of the Excessive Deficit Procedure: some more details • Always room for interpretation of standards => accounting creativity or even gimmickries: • Sale and lease back of government owned property • Assumption of pension liabilities of public corporations • PPPs • Securitisation • Etc. • Political pressure feeds into the process of defining and interpreting standards: • Recording of assumption of pension liabilities • Recording of government interventions into banking system • Recording of unfunded government sponsored pension entitlements

8. The case of the Excessive Deficit Procedure: some more details • Government policy determined by impact on indicators, not by what’s the sensible thing to do: • Pension reforms • Selling government property at the wrong time • Single indicators provide clear message, but they are also one-dimensional, and don’t tell the whole story • Appropriateness of the relevant indicators? • Deficit => Saving • Gross Debt => Net Financial Debt or Net Worth • Contingent liabilities

9. The case of the Excessive Deficit Procedure: way forward • Stop focussing too much on single indicators • Provide additional indicators (Saving, Net Financial Debt) • Provide additional data: • Table on guarantees and contingent liabilities • Table on implicit pension liabilities • Provide more metadata, and especially more information on possible caveats • Provide more story-telling, by putting data in a context • Developments initiated by Eurostat to be fully supported!

10. Way Forward • ??????? • Try to get more involved in the choice of indicators • Provide additional data and story-telling • Role and independence of statistics should always be laid down explicitly • When interpreting standards: economic substance should always override legislative interpretation of standards => need to define certain general principles • Secure additional funding of resources, instead of (implicitly) cutting back resources for other areas • ….

11. Thank you for your attention!