Last week at the invitation of Barclays Bank I had the opportunity over breakfast to listen to the thoughts of Chris Piper, who is the Bank of England Agent for Central Southern England. His role, along with his colleagues from the other eleven regions, is to provide the anecdotal evidence to support (or not as the case maybe) the statistical evidence that it gathers.
It was an off the record briefing so I can’t divulge all that he said. However one thing that struck me when he was taking us through the various statistics and forecasts that the Bank produce (and that are freely available on its website) was how dependent the whole direction of policy seemed to be on the completeness and the accuracy of such information.
This worries me somewhat given my past experience of filling out such forms for one of my then employer’s subsidiaries as a very junior accountant. The form I received requested various bits of data concerning the economic output of the company, and came with a stern reminder that this was compulsory under the Statistics Of Trade Act 1947 (which remains the act in force regarding the collection of data for government purposes to this day).
Given this company had specialised in doing projects in Iran under the Shah, and that these returns were being prepared in the late eighties, you can understand why the economic activity that was being reported was somewhat minimal. Even though I consistently reflected this, the returns kept on coming, and threat of non compliance remained.
I am not saying that today’s statistics are not prepared to the highest professional standards, as they clearly are, or that companies and individuals provide deliberately misleading data. It is just that in the battle between fallible human input and sophisticated mathematical processes the former will always win.
Therefore it is not surprising that in the area of crystal ball gazing, the Bank of England are probably as in the dark as the rest of us, in spite of the wealth of data at its disposal. That is why it needs to keep its ear closely to the ground, and why the work of Chris and his colleagues throughout the country is vital in ensuring that policy reflects what is necessary rather than what the numbers say.