Why we need the ONS to measure the social economy effectively

By David Ainsworth, Research Consultant

The charity sector is big. It spends more than £60bn a year on delivering social good in the UK, which is pretty comparable to the amount delivered by the education sector, or local government. It’s bigger than the armed forces and the emergency services combined.

And that’s just the money that goes in. We don’t measure the value that comes out. We don’t measure the value of non-monetary contributions either, which is a big oversight, because volunteering is estimated by the ONS to be worth tens of billions of pounds a year. .

And registered charities are just the best known bit of what the UN calls the social economy, and what we’ve tended to call civil society. 

Throw in housing associations (well over £20bn a year of turnover, according to government’s own figures), colleges and universities (also well over £20bn), other unregistered charities (another £20bn) social enterprises (probably over £60bn) and all sorts of other entities including religious institutions, trade unions and community organisations, and you end up with a very sizeable volume of  economic activity, as well as a huge amount of other activity which has enormous value, but can’t easily be measured with money.

The trouble is, we don’t know very much about where these organisations are and what they do. We don’t know how many people are employed. We don’t know how many volunteers there are. We don’t know where services are delivered, or how they make their money. 

We can make some guesses about charities, using data from the Charity Commission. But that data is hard to use, out of date, and intended for the purposes of accountability and scrutiny, not benchmarking and decision-making. And it ignores the rest of the sector.

This feels ridiculous. If total state spending is around £840bn, and civil society organisations are also spending in the hundreds of billions of pounds each year, then civil society is arguably delivering a very significant fraction of all the services the public receive. Don’t we want to know what’s going on?

Of course we do. So what’s to be done?

One option was outlined last year in a report by Danny Kruger, Conservative MP for Devizes. The report, commissioned by the Prime Minister himself, was produced with a view to strengthening the capacity of civil society. And one recommendation – set out in more detail in today’s new Commission on Civil Society report Taking Account: the case for establishing a UK social economy satellite account  was that the Office for National Statistics (ONS) should prepare a set of satellite accounts for the voluntary sector. 

This is an article about why that would be a very good idea.


What are satellite accounts?

Satellite accounts are a subset of the national accounts. National accounts track employment, inflation and growth, among other things, and satellite accounts are prepared when there is a particular sector of the economy which requires closer scrutiny, or where the value of that sector is not captured readily by statistics designed to track business activity.

Right now, that’s the situation with the social economy. At the moment, the ONS captures some information about charities and other entities under the rather unflattering acronym NPISH – non-profit institutions serving households – but this only captures parts of civil society. Trading charities, to pick one example, are excluded. And it says nothing about volunteering.

The UN already recommends that national governments collect information on what it terms “the social economy”; it published a guide on how it should be done in 2008. But the recommendation has not been implemented in the UK. The government says it doesn’t have the cash.

Satellite accounts may seem at first glance to be a relatively remote thing to focus on. But there are three reasons why they would be very useful. 

First, if we knew more about what was happening in civil society, it would help us demonstrate the value the sector creates. Second, it would help everyone understand where civil society is strongest, and where it is weakest. And third, it would help the Treasury understand why it’s important to create an enabling environment for charities and the social economy, and how to do it.

And satellite accounts would not just be useful for the sector. They would be useful to government. If we’re right, and a substantial proportion of all services to the public come from civil society, then government needs to understand this better. Surely it’s not ideal to have a situation where policymakers have little  idea about where or how so many public services are delivered. How can you design effective interventions in that situation?


The shape of the sector

Right now, there is an astonishing amount that we don’t know about civil society. We don’t really know where in the UK charities spend their money, or how many charities there are in each sub-sector – animals, health research, homelessness – or what business models charities use, or how many volunteers each charity has.

The information we do have is years out of date. Data on charities is being submitted to Companies House and HMRC almost in real time, but it cannot be accessed because we don’t know which submissions to those registrars relates to civil society. Instead, we use information from accounts submitted to the Charity Commission. That takes almost three years.

We’ve seen this during the recent period of uncertainty. How is the charity sector being affected by lockdown? How are incomes affected? Who is seeing increased demand for services? Are there regional differences? Has the sector lost £3bn? Or £6bn? Or £10bn? 

We still don’t really know. And we will not know for a long time.

Similarly right now, we are hearing more and more about “build back better” and “levelling up”. This is about initiatives to strengthen communities. Charities and civil society are key to this. But if we don’t know what work is taking place in which communities, how can we coordinate this effort?


An enabling environment

If we understood the value and the shape of the sector, we could understand and advocate for policy interventions that would allow us to do more. 

Charities are extremely useful for government, in many, many ways. And there are many ways in which government could create an enabling environment, often at little cost, which would help us do more for them.

This is not a new phenomenon. For the best part of a decade, we simply haven’t been able to tell the story of the sector and get anyone in Whitehall to listen. We’re often just forgotten. It’s not that we are considered unimportant. It is that we are not considered at all.

That invisibility is partly because no one is required to think about us. If the ONS gathered and shared information on the sector on a regular basis, and Treasury read it, we’d get considered earlier in the process. We’d be on the list to think about before a new tax or policy was introduced, not afterwards.


What’s stopping it from happening?

A set of satellite accounts for the sector would be a significant intervention, with wide-ranging benefits for civil society. It is already recommended practice. So why is it not happening?

The barriers are mostly cash and process. The cost isn’t prohibitive – around £70-100,000 – which is small compared either to the size of our multi-billion pound sector, or to the £207m-a-year budget of the ONS. But there’s a lot of stuff we should be counting and we’re not – natural assets, cultural assets, the value of government institutions like the NHS.

None of this is insurmountable. If it had to be done, it would be done.

To a certain extent, it is a chicken-and-egg scenario. In order to make the case that charities are important, we need better data. To make the case for better data, we need to show that charities are important enough to warrant it.

In practice, the biggest barrier is likely inertia. It is not happening simply because currently, it is not happening.

That means we need to shout loudly. We need enough of us to ask for it, often enough, until doing nothing will become more difficult than doing something. 

At that point, change will happen.

Interested in hearing more? Read Taking account: the case for establishing a UK social economy satellite account from the Commission on Civil Society.