Turning instinct into real economic insight

By Ed Conway, Economics & Data Editor, Sky News

There was a moment, early on in the pandemic, when Britain, and for that matter most countries around the world, were dangerously in the dark. The virus was spreading but the available data remained vague and incomplete. For a period, we stared into the abyss. We had few available tools to understand the nature of the spread, let alone doing anything about it.

It was one of the more vivid recent illustrations of the importance of data. Numbers cannot solve every problem; they can be manipulated and misused. But even so, they are invariably the best starting point we have for understanding the problems we face. Reliable, comparable data illuminates the challenges and opportunities for public policy, showing us where we are doing well or badly, allowing us to gauge our progress or our decline.

Once upon a time, the main way we measured the contribution of the NHS and the broader health system to our national accounts was to count how much money we put in. The actual performance of nurses, doctors and the wider health establishment was essentially irrelevant, until the late Sir Tony Atkinson wrote a report arguing for new metrics based on actual activity, giving us a better sense of the actual economic contribution of the NHS.

The upshot of that report, published nearly two decades ago, is that the UK is one of the few countries in the world to attempt to measure the actual productivity of the public sector. But while this country is near the head of the pack in measuring state sector output, it is sadly far behind the rest when it comes to measuring the social sector.

We know instinctively that volunteering, charity and social work are an important part of the economy. We know instinctively that many people devote much of their time – paid and unpaid – to helping others. We know instinctively that not only can this do good, it can also provide some prosaic economic benefits: happier, healthier people can make a greater contribution to the economy.

Yet trying to turn these instincts into data remains tricky, because unlike many other developed nations, the UK has not incorporated civil society into its national accounts. Actually, that’s not entirely true: many of the activities you’d put into the ‘civil society’ basket do show up, just not in any obvious place. While some of charities are grouped together in the snappily titled ‘non-profit institutions serving households’ sector of the national accounts, many are absorbed – alongside “normal” businesses – across a wide range of other sectors and industries, from human health and social work to education, arts and recreation.

Civil society is hardly the only sector to face these problems. Consider the lot of the tourism sector, where its economic contribution is scattered across GDP, from restaurants and hotels to other recreational spending. But, thanks to the economic importance of the sector, tourism has long had what are known as ‘satellite accounts’ – an official estimate, from the Office for National Statistics, of its contribution to overall GDP.

The good news is that the government is now working towards something similar for the social sector, aiming to create a new Civil Society Satellite Account. That will only be the beginning of it, for those accounts cannot give us a sense of the indirect impact of these activities. But it’s a start. We are moving closer to understanding how much economic value comes from civil society.

The results are likely to be quite startling. When Canada did a similar exercise it discovered that the sector accounted for a staggering 8.5% of GDP. It also uncovered all sorts of unexpected revelations: big variations in the size of the civil society from region to region, fascinating breakdowns in where that activity was happening.

It is going too far to say we don’t value something until we put a price on it. But putting a number on this activity is the first step towards gaining a better understanding of it.

This piece was written in response to the publication of the report ‘Unleashing the power of civil society’