The Voluntary Sector in the National Accounts

[this post was jointly written with Prof John Mohan from the Third Sector Research Centre (TSRC) at the University of Birmingham]

So, I’m going to talk to you about GDP and the National Accounts. No wait! Don’t click away to something else just yet – let me convince you that this is important stuff for the sector.

The national accounts show a picture of the whole country’s economy, allowing measurement of GDP growth, amongst other important numbers. But at the moment coverage of the voluntary sector in the national accounts is poor. We know this because that’s what Eurostat (the European body that oversees how national accounts are put together) told the Office for National Statistics (ONS) [pdf].

Why is this important? Well, this is about being able to place the voluntary sector in the UK economy. The sector’s contribution to the UK is about much more than just finances (as Robert Kennedy said, GDP measures everything “except that which makes life worthwhile”), but at the moment we can’t answer with confidence simple questions like “how much does the voluntary sector contribute to GDP?”

Nor can we easily make comparisons across countries. There are variations in the composition of the third sector which reflect particular features of the historical development of nations, so simple comparisons of the numbers and resources of non-profit organisations across countries are not a consistent basis for comparison. Application of consistent rules for deciding on which organisations are part of the non-profit sector is a key motivation for the major international comparative studies of the non-profit sector, initiated by the UN and led by Lester Salamon of Johns Hopkins University, Baltimore. In Salamon’s words, “valid and reliable statistics will enhance the visibility and credibility of voluntary organisations, contribute to improved transparency and accountability of the sector and of government, and provide empirical context for decision making and policy development”. The TSRC is involved in a major cross-country study of the scope and scale of the third sector in Europe, in which these issues of measurement will be prominent.

So ONS is working hard to improve the coverage of the sector, and they’ve been using NCVO and TSRC data on charities to do this – the same data that underpin NCVO’s Almanac and TSRC’s large-scale quantitative research. Between us, we’ve selected a representative sample of nearly 10 000 charities, and we capture and classify economic statistics from the notes to their accounts. ONS have used this financial information  to update a part of the accounts called NPISH (Non profit institutions serving households), which is where charities appear most. Interestingly, though, some of them will now appear elsewhere in the national accounts, if – for example – they derive most of their income from direct sales.

ONS recently hosted an event at NCVO explaining what the changes were and the reasons for them. They have now released an in depth explanation of the changes in methodology [pdf], plus an estimate of the impact of these changes. While the headlines were made by changes to measurement of prostitution and production of illegal drugs, the improvements to NPISH methodology are estimated to change GDP by up to £24 billion, or around 1.7%. This doesn’t mean the voluntary sector will be responsible for an economic recovery, as the changes are retrospective corrections to previous years, but it does mean we’ll be better at quantifying the contribution it makes to the economy.

There’s a great opportunity here to build on these changes to further improve the data on the voluntary sector. ONS hope to be able to separately report figures on NPISH in the next few years (currently they are bundled up into the household sector when they are reported).

There’s also an opportunity to produce a “satellite account”. These are frameworks that allow attention to focus on a specific field or aspect of economic and social life; the voluntary sector is a good example because it isn’t easily picked up in economic statistics (voluntary organisations can be found in all sections of the economy, for example) and some important aspects of it are not as amenable to counting as market transactions (e.g. the contribution of volunteers).  This would bring together all the places that the voluntary sector appears in the national accounts, and allow a much fuller picture of the voluntary sector economy to be produced.

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David Kane David Kane was formerly NCVO’s Senior Research Officer. He discusses open data and emerging trends in the voluntary and community sector and wider civil society.

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