MPs flag ‘major concerns’ over errors in labour survey

An influential group of MPs has taken aim at the UK’s national numbers body today amid fears that errors in its labour survey are hamstringing “accurate” economic policy making.

The chair of the Treasury Select Committee, Meg Hillier – a Labour MP – wrote to the boss of the UK Statistics Authority, Professor Sir Ian David Diamond, warning that she had “major concerns” over the UK’s ability to set monetary and fiscal policy due to repeated errors in the national labour force survey, the key source of data on unemployment.

The UK Statistics Authority has oversight of the Office for National Statistics, which produces the data.

Hillier’s comments follow two warnings from the governor of the Bank of England, Andrew Bailey, over the past two weeks over the quality of economic data being fed into the UK’s central bank.

Speaking at Mansion House, Bailey said the troubles of the survey were “well known” and repeated errors in the data were a “big problem”.

“The Bank, alongside other users, including the Treasury, continue to engage with the ONS on efforts to tackle these problems and improve the quality of UK labour market data,” he said.

Bailey repeated the warnings to the Treasury Select Committee this week, saying “we don’t know whether [we have] a good read or not a good read” on labour market participation, which the Bank uses as a “big signal on tightness of the labour market”.

Fears have spread over potential bias in the labour market survey due to the type of people that typically respond to the ONS’s researchers.

A report from the Resolution Foundation yesterday found ONS’s labour force survey had “misrepresented” what had happened in the jobs market in a recent report and given policymakers “an overly pessimistic picture”.

The think tank found the labour survey may have been undershooting growth in the workforce by some 930,000 people.

In a list of requests to Diamond, Hillier asked for “an outline of the problems with the LFS”; details on “what steps the ONS is taking to fix those issues” and the “impact of the steps taken to date”.

She also called for a progress update on the ONS’s March 2022 pledge to “vastly increase the number of those who complete the survey and make it more representative of the population as a whole”.

Paul Dales, chief UK economist at Capital Economics, said: “Setting interest rates is often likened to driving while looking in the rear-view mirror.

“If that is the case, setting interest rates with unreliable labour market data is like driving while looking in the rear-view mirror, with one eye closed.

“When policymakers don’t know the true condition of the labour market, there is a greater chance that interest rates are set too high or too low, which would mean the economy has a detrimental impact on the public.

Hillier has requested a response from Diamond by 4 December. The ONS said it would respond in “due course”.