ONS faces fresh scrutiny over flawed UK labour market data

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The UK’s national statistics agency is facing fresh scrutiny of its failure to produce reliable labour market data that policymakers view as “integral” to setting monetary and fiscal policy.

MPs on the Treasury select committee have written to Sir Ian Diamond, the UK’s national statistician, seeking clarification of how and when the problems affecting the Office for National Statistics’ data will be fully resolved.

The letter, sent on Thursday, came after Bank of England governor Andrew Bailey told the committee that the long-running problems with the ONS’s labour force survey (LFS) made it hard to tell how tight the jobs market was — an issue “integral” to the central bank’s economic forecast.

An official from the Office for Budget Responsibility, the fiscal watchdog, also told MPs the data issues meant he was “not very” confident in his view of the labour market.

“In the light of this evidence, we have major concerns about the UK’s ability to set monetary and fiscal policy appropriately in the absence of reliable data,” the letter from Meg Hillier, the committee’s chair, said.

The ONS has been working for the past year to boost the number of respondents to its labour force survey — the main source of information on the state of the UK jobs market. A plunge in the response rate forced it first to suspend LFS-based data, then to badge them as “statistics in development”.  

But the LFS-based figures remain volatile and difficult to interpret, leaving policymakers reliant for now on tax records and other surveys, which are a reasonable guide to employee numbers, but do not show how many people are out of work or why.

Research by the Resolution Foundation published this week argued that official data had “misrepresented” trends in the labour market since the Covid-19 pandemic, underestimating employment and overstating the rate of inactivity.

The ONS has been testing a new, transformed labour force survey. But the rollout of this is behind schedule and the ONS has only just begun testing a shorter questionnaire, after finding many people were failing to complete it, and older groups were disproportionately likely to respond.

The delay, which means the agency must run two big field surveys in parallel for longer, has strained its resources, forcing it to hire an extra 100 interviewers and temporarily redeploy staff from other areas. The ONS told the Financial Times the extended parallel run cost £3.6mn per quarter.

Hillier’s letter asked the ONS to clarify by early December what steps it has taken to fix the issues with both surveys, what progress it has seen and when it expects the problems to be fully resolved.

The ONS said it would respond “in due course”. The agency has previously said it expects LFS-based data to improve in quality from the start of 2025, after it factors in new estimates of the UK’s population size, but that it is too soon to tell when the TLFS will be ready to replace it.