UK GROSS NATIONAL INCOME (ESA95) INVENTORY CHAPTER 5 THE EXPENDITURE APPROACH

Transcription

1 UK GROSS NATIONAL INCOME (ESA95) INVENTORY CHAPTER 5 THE EXPENDITURE APPROACH

2 TABLE OF CONTENTS CHAPTER 5.0 GDP BY EXPENDITURE APPROACH OVERVIEW Household final consumption expenditure NPISH final consumption expenditure General government final consumption expenditure Gross fixed capital formation Changes in inventories Acquisitions less disposals of valuables Exports of goods and services Imports of goods and services CHAPTER 5.1 THE REFERENCE FRAMEWORK REFERENCE FRAMEWORK Household final consumption expenditure NPISH final consumption expenditure Government final consumption expenditure Gross fixed capital formation Changes in inventories Acquisitions less disposals of valuables Exports and imports of goods Exports and imports of services CHAPTER 5.2 VALUATION CHAPTER 5.3 TRANSITION FROM PRIVATE ACCOUNTING CONCEPTS TO ESA95 NATIONAL ACCOUNTS CONCEPTS CHAPTER ROLES OF DIRECT AND INDIRECT ESTIMATION METHODS CHAPTER ROLES OF BENCHMARKS AND EXTRAPOLATION CHAPTER 5.6 EXHAUSTIVENESS CHAPTER 5.7 HOUSEHOLD FINAL CONSUMPTION EXPENDITURE OVERVIEW Classification of individual consumption Principal data sources EXPENDITURE ON GOODS AND SERVICES Food and non-alcoholic beverages Alcoholic beverages, tobacco and narcotics Clothing and footwear Housing, water, electricity, gas and other fuels Furnishings, household equipment and routine household maintenance Health Transport Communication Recreation and culture Educational services Restaurants and hotels Miscellaneous goods and services TRANSITION FROM DOMESTIC CONCEPT TO NATIONAL CONCEPT Final consumption expenditure in the UK by households resident in the ROW Final consumption expenditure outside the UK by UK resident households CHAPTER 5.8 NPISH FINAL CONSUMPTION EXPENDITURE OVERVIEW CURRENT EXPENDITURE ON GOODS AND SERVICES Academic establishments Religious organisations Trade unions

3 2.4 Ex-corporation duty bodies (livery companies) of the city of London Friendly societies Clubs and societies Professional/learned societies and consumers associations Charities ESA change series Quality adjustment Consumption of fixed capital CHAPTER GOVERNMENT FINAL CONSUMPTION EXPENDITURE INTRODUCTION CENTRAL GOVERNMENT FINAL CONSUMPTION Overview The detailed estimates LOCAL AUTHORITIES FINAL CONSUMPTION Overview Detailed estimates CHAPTER 5.10 ACQUISITIONS LESS DISPOSALS OF TANGIBLE FIXED ASSETS INTRODUCTION Acquisitions and disposals Timing and valuation Costs of ownership transfer Estimation methodology Land Financial leasing Progress payments GFCF by non-residents The detailed analyses of gross fixed capital formation TANGIBLE FIXED ASSETS New dwellings excluding land Other buildings and structures Transport equipment Other machinery, equipment and cultivated assets EXHAUSTIVENESS Estimates of GFCF by unincorporated businesses The hidden economy CALCULATION OF ACQUISITIONS LESS DISPOSALS OF TANGIBLE FIXED ASSETS Overview Private sector new dwellings excluding land Private sector all other tangible assets Public non-financial corporations all tangible assets General government all tangible assets CHAPTER 5.11 ACQUISITIONS LESS DISPOSALS OF INTANGIBLE FIXED ASSETS OVERVIEW Mineral exploration Computer software Entertainment, literary and artistic originals Sectorisation of data CHAPTER 5.12 ADDITIONS TO THE VALUE OF NON-PRODUCED NON FINANCIAL ASSETS INTRODUCTION Overview Land Subsoil assets Other intangible non-produced assets ESTIMATION Detailed calculation of transfer costs

4 CHAPTER 5.13 CHANGES IN INVENTORIES INTRODUCTION Overview Deflation of inventory levels to constant prices Reflation of changes in inventories to current prices COMMERCIAL VALUATION OF INVENTORIES DATA SOURCES Book value levels of inventories held Book value and current price inventories indices CALCULATION OF CHANGES IN INVENTORIES - WORKED EXAMPLE INDUSTRY SPECIFIC SOURCES AND METHODS Manufacturing industries Wholesale Mining & quarrying Retail Motor trades Construction Services Agriculture and forestry Central government (intervention board for agricultural produce) ANNEX 1 - HOLDING GAINS ON INVENTORIES INTRODUCTION CALCULATION OF HOLDING GAINS Overview Worked example for calculation of holding gains SECTORISING HOLDING GAINS FOR GROSS OPERATING SURPLUS CHAPTER 5.14 ACQUISITIONS LESS DISPOSALS OF VALUABLES INTRODUCTION ESTIMATES CHAPTER 5.15 EXPORTS OF GOODS INTRODUCTION Overview of trade in goods Source Basis of valuation for TSO exports data Adjustments to TSO exports data Coverage adjustments EXPORT OF GOODS CALCULATION Overseas trade statistics on exports (fob) Coverage adjustments Other adjustments CHAPTER 5.16 EXPORTS OF SERVICES INTRODUCTION Overview TRANSPORTATION SERVICES Overview Sea transport Air transport Other transport TRAVEL Overview Business travel Personal travel COMMUNICATION SERVICES Overview Postal/courier services Telecommunication CONSTRUCTION SERVICES INSURANCE SERVICES

5 6.1 Overview Life insurance and pension funds Freight Other direct insurance Reinsurance Auxiliary insurance services FINANCIAL SERVICES Overview Monetary financial institutions (banks) Fund management companies Money market brokers Securities dealers Baltic Exchange Other COMPUTER AND INFORMATION SERVICES ROYALTIES AND LICENSE FEES OTHER BUSINESS SERVICES Overview Merchanting and other trade related services Operational leasing Miscellaneous business, professional and technical services PERSONAL, CULTURAL AND RECREATIONAL SERVICES GOVERNMENT Overview Expenditure by foreign embassies/consulates in the UK: Military units and agencies: Other: CHAPTER 5.17 IMPORTS OF GOODS INTRODUCTION Overview of trade in goods Source Basis of valuation for TSO import data Adjustments to TSO imports data Exhaustiveness IMPORTS OF GOODS CALCULATION Overseas trade statistics of imports (cif) Coverage adjustments Valuation adjustments Other adjustments CHAPTER 5.18 IMPORTS OF SERVICES INTRODUCTION TRANSPORTATION SERVICES Overview Freight and the valuation of trade in goods Sea transport Air transport Other transport TRAVEL Overview Business travel Personal travel COMMUNICATION SERVICES CONSTRUCTION SERVICES INSURANCE SERVICES FINANCIAL SERVICES COMPUTER AND INFORMATION SERVICES ROYALTIES AND LICENSE FEES OTHER BUSINESS SERVICES PERSONAL, CULTURAL AND RECREATIONAL SERVICES GOVERNMENT

6 12.1 Overview Expenditure abroad by UK embassies and consulates Expenditure abroad by UK military units and agencies: Other

7 CHAPTER 5.0 GDP BY EXPENDITURE APPROACH 1 OVERVIEW The expenditure approach measures total expenditure on final goods and services produced in the domestic economy or, alternatively, the sum of final uses of goods and services by resident institutional units plus exports less imports of goods and services. The total is obtained from the sum of final consumption expenditure by households, non-profit institutions serving households (NPISH) and government on goods and services; gross capital formation (capital expenditure on fixed and intangible assets, changes in inventories and acquisitions less disposals of valuables); and net exports of goods and services. These categories are estimated from a wide variety of sources including expenditure surveys, the government s internal accounting system, surveys of traders and the administrative documents used in the importing and exporting of some goods. The table below shows how the expenditure measure of GDP is put together with example figures for ( M) Household final consumption expenditure (chapter 5.7) NPISH final consumption expenditure (chapter 5.8) Government final consumption expenditure (chapter 5.9) Gross fixed capital formation (chapter ) Changes in inventories (chapter 5.13) Acquisitions less disposals of valuables (chapter 5.14) Exports of goods (chapter 5.15) Exports of services (chapter 5.16) Exports of goods and services Imports of goods (chapter 5.17) Imports of services (chapter 5.18) Imports of goods and services GDP = Household final consumption expenditure Household final consumption expenditure covers the purchase of goods and services to meet individuals requirements for day to day living (including housing). Household final consumption expenditure is described in detail in chapter NPISH final consumption expenditure NPISH final consumption expenditure is described in detail in chapter 5.8. The chapter covers expenditure by non-profit institutes such as charities and trade unions. 1.3 General government final consumption expenditure General government final consumption expenditure is described in detail in chapter 5.9. The sector is divided into two parts; central government expenditure obtained from appropriation accounts; and local government expenditure obtained from local authority returns to the Department of Environment, Transport and the Regions (DETR). 1.4 Gross fixed capital formation Gross fixed capital formation is estimated (mainly based on NS surveys) using information on the purchases of capital goods. It is built up from three separate components: acquisitions less disposals of tangible fixed assets (see chapter 5.10); acquisitions less disposals of intangible fixed assets (see chapter 5.11); additions to the value of non-produced non-financial assets (see chapter 5.12). 147

8 1.5 Changes in inventories The calculation of changes in inventories is described in detail in chapter This chapter also includes a description of the holding gains calculation, although this is appropriate to the income rather than expenditure measure of GDP. 1.6 Acquisitions less disposals of valuables Valuables are essentially goods which are not used in the production process, and which are generally held as a store of value. Estimates of acquisitions less disposals of valuables are mainly based on the value of imported and exported valuables supplied by HM Customs and Excise. Acquisitions less disposals of valuables is described in detail in chapter Exports of goods and services Exports of goods and services covers the provision of goods and services by UK residents to nonresidents. A detailed description of exports of goods and services can be found in chapter 5.15 and chapter 5.17 respectively. 1.8 Imports of goods and services Imports of good and services cover the provision of goods and services by non-residents to UK residents. A detailed description of imports of goods and services can be found in chapter 5.16 and chapter 5.18 respectively. 148

9 CHAPTER 5.1 THE REFERENCE FRAMEWORK 1 REFERENCE FRAMEWORK The principal data sources used for the expenditure approach are outlined below for each of the main components of the expenditure approach. 1.1 Household final consumption expenditure The principal data sources used for household final consumption are NS inquiries to households about their expenditure (e.g. Family Expenditure Survey) and the NS Annual Business Inquiry (e.g. retailers, brewers etc.). These are supported by the National Food Survey, the International Passenger Survey (IPS), government accounting data on services provided to households (e.g. fees for driving tests) and a variety of minor sources. The characteristics of these data sources are outlined in chapter 5.7 Household Final Consumption Expenditure). 1.2 NPISH final consumption expenditure Calculation of NPISH final consumption expenditure is mainly based on data from academic establishments (provided by Higher Education Statistics Agency and government accounting data on grants etc.) and data on charities (from benchmark and update surveys conducted by the ONS). This is supported by data from a variety of mainly administrative sources (e.g. trade unions and friendly societies). The characteristics of these data sources are outlined in chapter 5.8 NPISH Final Consumption Expenditure. 1.3 Government final consumption expenditure Calculation of government final consumption expenditure is based on data provided by the government Appropriation Accounts and data for local government provided by the Department of the Environment, Transport and the Regions, etc. The characteristics of these sources are outlined in chapter 5.9 Government Final Consumption Expenditure. 1.4 Gross fixed capital formation The calculation of gross fixed capital formation is mainly based on data from the NS Quarterly Capital Expenditure Inquiry plus data on investment by the public sector. The characteristics of these sources are described in chapters 5.10 Acquisitions less Disposals of Tangible Fixed Assets; 5.11 Acquisitions less Disposals of Tangible Fixed Assets; and 5.12 Additions to the Value of Non Produced, Non Financial Assets. 1.5 Changes in inventories Source data for information on changes in inventories is mainly provided by the quarterly inventory inquiry run by ONS. The characteristics of this data source are outlined in chapter 5.13 Changes in Inventories. 1.6 Acquisitions less disposals of valuables The main source of data for acquisitions less disposals of valuables is administrative data on the value of imports and exports of valuables from HM Customs and Excise (C&E). The characteristics of this data source are outlined in chapters 5.14 Acquisitions less Disposals of Valuables. 1.7 Exports and imports of goods The statistics of trade in goods compiled by the ONS are derived principally from data provided to the ONS by the Tariff and Statistical Office of C&E. This covers the value of physical goods exported from or imported to the UK. The characteristics of this data source are outlined in chapters 5.15 Exports of Goods and 5.17 Imports of Goods. 149

10 1.8 Exports and imports of services The major source of data on exports and imports of services are the International Trade in Services Survey (ITIS) and the IPS. These are used in conjunction with other survey sources (e.g. tailor made surveys carried out by the Civil Aviation Authority and Chamber of Shipping). For financial services, information is supplied by the Bank of England, NS surveys etc. The characteristics of all these data sources are outlined in chapters 5.16 Exports of Services and 5.18 Imports of Services. 150

11 CHAPTER 5.2 VALUATION Where practical the ONS ensures that it receives sufficient data from the relevant source to conform to ESA95 prices. In some cases this is not practical and then ONS makes the necessary adjustments to conform to ESA95 rather than asking the data supplier to make the adjustment. In the expenditure approach the survey sources used are predominantly in line with ESA95 concepts and no significant adjustments are necessary. CHAPTER 5.3 TRANSITION FROM PRIVATE ACCOUNTING CONCEPTS TO ESA95 NATIONAL ACCOUNTS CONCEPTS The ONS ensures that it receives enough data to make any adjustments necessary for the transition from private accounting concepts to ESA95 national accounts concepts ensuring a correct treatment within the accounts. Since the majority of data is based on sample surveys specifically designed for national accounts purposes this type of adjustment is not significant within the expenditure approach. Where adjustments are necessary (e.g. to move from cost, insurance, freight to free-on-board values in imports of goods) these adjustments are detailed in the relevant chapter. Additionally, a new category of fixed capital formation (Intangible assets) has been added to UK national accounts to cover capital expenditure on computer software, mineral exploration, entertainment and literary originals etc. This brings the expenditure approach fully in line with ESA95 rules (see chapter 5.11 for more details). 151

12 CHAPTER ROLES OF DIRECT AND INDIRECT ESTIMATION METHODS For the reference year (t-4) the expenditure approach is mainly based on direct estimation methods, that is, sample surveys and administrative records. Model based estimation is used during the reference year for the calculation of consumption of fixed capital (non-market output) and for the calculation of imputed rental of owner-occupiers. Calculation of consumption of fixed capital (non-market output), which feeds into both government and NPISH final consumption, is explained in detail in chapter Calculation of imputed rental of owner occupiers, which is a component of household final consumption expenditure, is outlined within chapter 5.7 Household Final Consumption Expenditure Activity Household final consumption expenditure (chapter 5.7) NPISH final consumption expenditure (chapter 5.8) Government final consumption expenditure (chapter 5.9) Acquisitions less disposals of tangible and intangible fixed assets (chapter ) Additions to the value of non-produced non-financial assets (chapter 5.12) Changes in inventories (chapter 5.13) Acquisitions less disposals of valuables (chapter 5.14) Exports of goods (chapter 5.15) Exports of services (chapter 5.16) Imports of goods (chapter 5.17) Imports of services (chapter 5.18) Estimation Method Survey-based Administrative data (various) Administrative data (GEMS) Survey-based plus administrative data for the public sector Mainly survey based Survey-based Administrative and survey data (HM Customs and Excise) Administrative and survey data (HM Customs and Excise) Survey-based Administrative and survey data (HM Customs and Excise) Survey-based 152

13 CHAPTER ROLES OF BENCHMARKS AND EXTRAPOLATION By the reference year (t-4) the vast majority of data used in national accounts has been provided to ONS and as a result extrapolation from earlier benchmarks is not a major issue. However, extrapolation from benchmark data is used in some of the smaller series (e.g. expenditure by charities in NPISH final consumption expenditure) and is therefore explained in detail wherever necessary. CHAPTER 5.6 EXHAUSTIVENESS As with all of the three approaches to measuring GDP, ONS makes significant efforts to ensure exhaustiveness in the expenditure approach. In the reference year estimates are mainly based on a variety of survey and administrative data, which are themselves, of high quality. No specific exhaustiveness adjustments are carried out in the expenditure approach because the data sources are considered to be comprehensive. However, in the main component of expenditure (household final consumption), confronting data at a low level helps ensure exhaustiveness. This means checking data from the NS household inquiries against data from NS business inquiries and making adjustments to the primary data source wherever necessary. For example, data from the Family Expenditure Survey on expenditure on food and drink, is adjusted for under reporting in the consumption of chocolate and soft drinks from data obtained from the Annual Business Inquiry. The background on data quality in the expenditure approach is detailed in chapter 7 Exhaustiveness, with details of the most important source surveys in chapter 11 Main Data Sources. The checks and adjustments used to ensure exhaustiveness are also outlined in chapter 7 and detailed where appropriate in chapter

14 CHAPTER 5.7 HOUSEHOLD FINAL CONSUMPTION EXPENDITURE 1 OVERVIEW This section describes the measurement of final consumption expenditure of UK resident households. For national accounting purposes, households are individuals or groups of people sharing living accommodation and, possibly, other aspects of daily life such as meals. Their consumption expenditure covers the purchase of all goods and services, including housing services, to meet their requirements for day-to-day living. It does not include the purchase of dwellings or expenditure on valuables (antiques and some jewellery), which are part of capital formation, nor does it include any expenditure on goods or services for use in a business. Expenditure claimed for business tax purposes on, for example, cars, is therefore excluded. Household consumption includes a wide range of goods and services received by households as income in kind, in lieu of cash. The main items are the use of company cars for private purposes and free or subsidised accommodation or meals. The estimates are also included, for consistency, as part of output for the production measure and within compensation of employees in the income estimates of gross domestic product. The estimates of household consumption are net of sales of second-hand goods by households. Where sale and purchase is directly between households the transactions net out to zero. However, where purchases are made from dealers, the figures include the value of the dealers' margins. Where transactions are with other sectors, such as the purchase of a second-hand company car, the full value of the purchase is recorded in household consumption (while the sale value would have been included as negative fixed capital formation in the corporations sector). Consumption expenditure by UK resident households can take place either in the UK or the rest of the world. The consumption expenditure, which takes place in the rest of the world, is regarded as an import of services to the UK. Correspondingly, consumption expenditure in the UK by households resident in the rest of the world is regarded as a UK export of services in the national accounts. Thus, total final consumption expenditure in the UK by all households has to have imports of services added and exports deducted in order to arrive at UK household final consumption expenditure for the national accounts. Historically, UK household expenditure data have been compiled by this route, starting with the so-called domestic concept and moving to the national concept. But for future compilation (from autumn 2001) following the move to direct data collection designed to match the Classification of Individual Consumption by Purpose (COICOP), as described below, it may prove more satisfactory to produce national concept data directly for at least some types of expenditure and then derive the domestic concept data from them if required. Final consumption expenditure in the UK by resident and non-resident households (domestic concept) (section 2) Final consumption expenditure in the UK by households resident in the rest of the world (exports of services) (section 3.1) Final consumption expenditure outside the UK by UK resident households (imports of services) (section 3.2) Final consumption expenditure by UK resident households in the UK and the rest of the world (national concept) 1995 ( M) = Classification of individual consumption For presentation purposes, household final consumption expenditure is broken down according to COICOP. However, the underlying data series are assembled by a variety of methods and routes, depending on the data sources used. As a result, the details in the COICOP presentation are, at present (Blue Book 2000), derived from other presentations used for UK purposes. Direct collection of data using the COICOP framework will be extended over the next two years and historic COICOP estimates will be reviewed as necessary. 154

15 1.2 Principal data sources The principal data sources used are: NS Annual Business Inquiry (ABI) to businesses about their sales, (e.g. retailers, brewers etc.); NS inquiries to households about their expenditure - Family Expenditure Survey (FES) i.e. the UK s household budget survey, National Food Survey (NFS), International Passenger Survey (IPS); government accounting data on services provided to households (e.g. fees for driving tests); information supplied by regulated industries to the regulatory body, (e.g. OFTEL, the office of the telecommunications industry regulator). These are supported by: commercial market research surveys; accounting/management information produced by businesses for their own purposes. The choice of data source for any given type of expenditure is generally determined by the perceived comprehensiveness and reliability of that source. Thus, in very broad terms, expenditure on goods is measured predominantly from business information while expenditure on services is measured predominantly from inquiries to households. In most cases, goods are traded openly and their sales are relatively easy to monitor, distinguishing private from business purchasers. The same is not always true for services. Business providers frequently find it difficult to identify whether they are supplying services to households or business users. Certain household services, e.g. babysitting, are frequently provided on an informal basis by individuals who might not be registered as businesses and thus not be captured by business inquiries. Household surveys are more likely to record expenditure on these services, as long as their provision is legal. All household expenditure series produced for the national accounts are quarterly. Most input data are collected at least quarterly; some are monthly but some are only annual, as noted below. The main business inquiries conducted by the ONS, including those to retailers and motor traders, are annual and are supplemented by monthly and quarterly inquiries collecting less detailed information. All are statistical sample inquiries based on the government s Inter-Departmental Business Register, addressed to all the largest businesses and samples of smaller ones. 155

16 2 EXPENDITURE ON GOODS AND SERVICES FINAL CONSUMPTION EXPENDITURE BY HOUSEHOLDS 1995 ( M) Food and non-alcoholic beverages (section 2.1) Food (section 2.1.1) Non-alcoholic beverages (section 2.1.2) Alcoholic beverages and tobacco (section 2.2) Alcoholic beverages (section 2.2.1) Tobacco (section 2.2.2) Clothing and footwear (section 2.3) Clothing (section 2.3.1) Footwear (section 2.3.2) Housing, water, electricity, gas and other fuels (section 2.4) Actual rentals for housing (section 2.4.4) Imputed rentals for housing (section 2.4.2) Maintenance and repair of the dwelling (section 2.4.3) Water supply and miscellaneous dwelling services (section 2.4.4) Electricity, gas and other fuels (section 2.4.5) Furnishings, household equipment and routine household maintenance of the house (section 2.5) Furniture, furnishings, carpets and other floor coverings (section 2.5.1) Household textiles (section 2.5.2) Household appliances (section 2.5.3) Glassware, tableware and household utensils (section 2.5.4) Tools and equipment for house and garden (section 2.5.5) Goods and services for routine household maintenance (section 2.5.6) Health (section 2.6) Medical products, appliances and equipment (section 2.6.1) Out-patient services (section 2.6.2) Hospital services (section 2.6.3) Transport (section 2.7) Purchase of vehicles (section 2.7.1) Operation of personal transport equipment (section 2.7.2) Transport services (section 2.7.3) Communications (section 2.8) Recreation and culture (section 2.9) Audio-visual, photographic and information processing equipment (section ) Other major durables for recreation and culture (section 2.9.2) Other recreational items and equipment, flowers, gardens and pets (section ) Recreational and cultural services (section 2.9.4) Newspapers, books and stationery (section 2.9.5) Package holidays (section 2.9.6) Educational services (section 2.10) Restaurants and hotels (section 2.11) Catering services (section ) Accommodation services (section ) Miscellaneous goods and services (section 2.12) Personal care (section ) Personal effects (not elsewhere classified (n.e.c.)) (section ) Social protection (section ) Insurance (section ) Financial services n.e.c. (section ) Other services n.e.c. (section ) Total final consumption expenditure in the UK by resident and non-resident households (domestic concept) =

17 2.1 Food and non-alcoholic beverages Food The main data source up to 2000 has been the NFS of households, conducted for the Ministry of Agriculture, Fisheries and Food (MAFF). From 2001 this survey is expected to be combined with the FES as the Expenditure and Food Survey (EFS) when it will provide data directly under COICOP headings. At that point, the historic NFS data will be reassessed in the light of emerging EFS results and any necessary adjustments made to give a consistent time series. The NFS collects extensive detail of food purchased for consumption in the home. It includes take-away foods, but these are identified separately and omitted from this COICOP food heading and treated as part of 11.1 catering services. The NFS does not include meals and other foods provided by catering establishments for consumption on their premises. The NFS is known to underestimate expenditure on some casual purchases, particularly confectionery and ice cream that never reach the home, so data on those are supplemented by data obtained from trade sources (i.e. manufacturers associations). In making the household expenditure estimates for the economic accounts the survey data are also adjusted upwards in respect of some other food items (e.g. cakes, biscuits, fresh fruit and nuts) where significant retail purchases by members of the household for consumption outside the home occur. A downwards adjustment is made to reflect the reduction in household expenditure on food by those residents on holiday in the UK or overseas. The information from the NFS is essentially on the basis of expenditure per household, and is grossed up to the estimate of the household population Non-alcoholic beverages Expenditure on tea, coffee and cocoa is obtained from the NFS. Data on soft drinks, as for confectionery (see previous paragraph), are obtained by MAFF from the NFS supplemented by information from trade sources. From 2001, the NFS data are expected to be obtained from the new EFS. As for food, the NFS is known to underestimate expenditure on some casual purchases that never reach the home, so data on those are supplemented or replaced by those obtained from NS production inquiries. Some of those purchases will be from vending machines and street traders and should be classified to 11.1 catering services, not this beverages category. In practice, data are not available to make this distinction and the total is included in Alcoholic beverages, tobacco and narcotics Alcoholic beverages HM Customs and Excise (C&E) produce monthly volume data (litres) on alcoholic drinks released from bond for UK consumption. Various types of beers, wines and spirits are identified, grouped according to alcoholic strength and the different rates of excise duty payable on each. These volume figures are valued at current market prices using price information derived from commercial data, purchased by NS, on the alcoholic drinks trade. The commercial information provides details of both volumes and prices charged to consumers for all main types of alcoholic drink sold through a large sample of outlets in the UK. Separate data are provided for outlets licensed for consumption of alcohol on the premises ( on trade restaurants, public houses etc) from those licensed to sell for consumption off the premises ( off trade retail shops etc). This information will be used to derive separate estimates of household expenditure for the two appropriate COICOP categories: alcoholic beverages off trade ; and restaurants, cafés and the like on trade. Although, at present, the data shown in the table above are not subdivided in this way, all alcoholic drink is included in Prior to 1994, estimates of expenditure on alcoholic drink were based largely on quantity data (volume of production for beer, volumes on which duty was paid for wines and spirits). These were inflated to current prices using information from the UK retail prices index (RPI) and other sources. From 1995, estimates of household expenditure on alcoholic drink smuggled into the UK are also being made for inclusion in the accounts to be published in These are based on C&E intelligence on the level of smuggling taking place together with assumptions on the prices at which the smuggled goods are sold to consumers through different types of outlet. Retail shops and restaurants are assumed to sell at the same prices as the rest of their stock. For street sales (i.e. not through off-licences or restaurants), 70% of the average legal UK price is expected to be used for beer and 115% of the French prices (published by the French Statistical Institute) for wines and spirits. 157

18 2.2.2 Tobacco C&E provide volume data on clearances from bond of cigarettes and other tobacco products for the domestic market. These are valued at current prices using price information obtained for the RPI. From 1995, estimates of household expenditure on cigarettes and other tobacco products smuggled into the UK are also being made for inclusion in the accounts published in These are based on C&E intelligence on the volume of smuggling taking place and the routes by which the goods reach UK households. The prices at which these goods are bought by UK households are assumed to be slightly above Belgian market prices Narcotics No estimates of expenditure on narcotics are included in the UK accounts (see chapter 7 Exhaustiveness). 2.3 Clothing and footwear Clothing This covers expenditure on clothing and also its hire, repair and cleaning. Expenditure on clothes is based on sales information collected in the ABI to retailers and other relevant producers and traders. For the most recent year, data from the short-period inquiries are used to extrapolate the series: these inquires collect monthly information on total sales by retailers and quarterly data on sales of broad commodities by large retailers. Separate series exist for men's and boys' wear, women's, girls' and infants' wear. Expenditure on hire, repair and cleaning of clothes (dry cleaning and laundry) is derived from the FES Footwear As for clothing (see above) estimates at current prices are based on sales information collected in the ABI to retailers and other relevant producers and traders; and on FES data for shoe repairs. 2.4 Housing, water, electricity, gas and other fuels Actual rentals for housing Estimates of quarterly rentals paid are derived in two broad groups. Estimates of rents paid to local authorities and housing associations are provided annually by those two groups of institutions. For rents paid to private sector landlords, estimates are based on information from the FES, covering both furnished and unfurnished properties. This second component also includes an estimate for 'other' rents, such as on caravans, and ground rent on leasehold property. The survey-based elements are grossed up to totals from the Department of the Environment, Transport and the Regions (DETR) housing stock data Imputed rentals for housing In the national accounts, owner-occupiers are deemed to be unincorporated businesses producing housing services, which they then consume. This consumption is a component of household final consumption expenditure. The same value also appears elsewhere in the accounts as a component of production (of housing services) by, and income of, unincorporated enterprises within the household sector. Thus the contribution of this item is the same in all three approaches production, income and expenditure - to measurement of GDP. The main reason for this imputation treatment is to minimise distortions to the consumption figures which would otherwise arise when there were changes in housing tenure, for example from rented to owneroccupied. Such distortions can exist between different countries but also over time within a single country. This treatment thus requires the imputing of a rental payment to the owner-occupied sector, analogous to the activity of payment of market or public sector rentals. For imputed rentals separate estimates, using similar methodology to paid rental, are made both for owner-occupiers and those living rent free. 158

19 The broad principle involved is to impute to a given owner-occupied property a rental value, which is the same as the rental that would be paid for a similar property in the private rented sector. The existing methodology was introduced in the 1996 annual UK accounts as part of the European Union Council Decision under the GNP Directive. The approach involves establishing a benchmark for imputed rentals, which is then projected forward. The benchmark figures are derived from an econometric regression model which uses certain characteristics of dwellings (such as location, type, size and age) to provide estimates of imputed rental based on rentals actually paid. The benchmark was established for the first quarter of 1991, the period when data were available from the English House Conditions Survey, and the decennial Census of Population. Estimates for subsequent periods are based on movements in the number of owner-occupied dwellings (provided by the DETR) and average rentals paid for comparable properties (obtained from government accounts for public sector housing and the FES for privately rented dwellings) Maintenance and repair of the dwelling For consistency with the treatment of housing rental, this heading covers only the type of maintenance and repair expenditure that would be incurred by a tenant, not a landlord. (Any expenditure incurred by a landlord, including such activity by owner-occupiers, would be intermediate consumption expenditure of a producer of housing services rather than final consumption expenditure by a household.) It is estimated as a proportion of expenditure on do-it-yourself goods the total of which is obtained from the ABI to retailers and related NS short-period inquiries Water supply and miscellaneous services related to the dwelling Estimates of household payments for water and sewerage charges are based on information provided by the Office of Water Services (in respect of England and Wales) and by the Scottish Executive (for Scotland) Electricity, gas and other fuels Electricity, gas, coal and coke Estimates of electricity, gas, coal and coke at current prices are based on the quarterly value of supply to consumers as provided by the supply companies to the Department of Trade and Industry (DTI). Other fuels. Estimates of the quantity and value of paraffin, fuel oil and liquid gases bought by consumers for use in dwellings (i.e. not vehicles) are provided by supplying companies or their trade associations to the DTI. There are no statistics for expenditure on wood for fuel but the amount involved is relatively small, consequently the figures are broad estimates. 2.5 Furnishings, household equipment and routine household maintenance Furniture and furnishings, carpets and other floor coverings This covers all household expenditure on new or used furniture and floor coverings except office and garden furniture. It includes picture frames, antiques and works of art, but excludes any antiques etc purchased for investment (which are treated as capital formation). Data on retail sales are collected in the ABI. Data on repairs for households are obtained from the FES. Hiring of furniture is excluded from here and included with domestic and household services (2.5.6 below) Household textiles This includes furnishing fabrics, curtains, cushions, bedding, bed and table linen and their repair. Data on retail sales are collected in the ABI. Data on repairs for households are obtained from the FES Household appliances This heading covers all retail sales and repair of domestic appliances. It includes electrical and gas appliances (e.g. cookers, washing machines, refrigerators, dishwashers, heaters, vacuum cleaners, sewing machines etc) but excludes central heating which is regarded as capital expenditure. Audiovisual appliances (televisions etc.) and small electrical appliances for personal use (e.g. shavers, 159

20 hairdryers) are excluded; they are covered in and below respectively. Data on total sales are collected in the ABI. Data on repairs for households are obtained from the FES Glassware, tableware and household utensils Data on retail sales are collected in the ABI. Supplementary data from the FES are used to subdivide sales between this heading and the following one, Tools and equipment for house and garden This includes such items as power tools, ladders, lawnmowers and small electrical accessories (sockets, wiring, torches, batteries etc). Data on sales are collected in the ABI. Data on hire and repair of tools and equipment for domestic use are obtained from the FES Goods and services for routine household maintenance The main data source is the FES, which provides information on household expenditure on soap, detergents and other cleaning materials and also on domestic services such as cleaning of the house, window cleaning, dry cleaning and laundering of household textiles and hire of furniture and household equipment. 2.6 Health Medical products, appliances and equipment Household expenditure on medical products are subdivided under two broad headings: goods, including prescription drugs, spectacles, contact lenses, dentures and appliances, provided under the National Health Service (NHS); and similar products purchased privately (including items financed by private health insurance schemes). Data on patients payments for NHS pharmaceutical services are provided by the NHS and government bodies. These relate only to that part of the total cost actually paid by patients, not the full cost of the items. Data on private purchases of medication come from the NS retail sales inquiry and include any expenditure that may be reimbursed by private insurers Out-patient services As for medical products (see above) outpatient services may be obtained through the NHS or privately. The principal NHS service for which patients make a contributory payment is dental services. Data on this expenditure are obtained from NHS sources. Household expenditure on private outpatient services provided by, for example, doctors, dentists, opticians, physiotherapists and nurses, is obtained from the FES and insurance companies. Expenditure reimbursed (or paid direct) by private insurers or other businesses is included Hospital services Most hospital services are provided free through the NHS. Data on those for which charges are levied (including private beds in NHS hospitals) are obtained from the Department of Health. Expenditure on private hospital services is obtained from the FES and insurance companies. Expenditure reimbursed (or paid direct) by private insurers or other businesses is included. 2.7 Transport Purchase of vehicles Estimates of household spending on new cars are based on information on the official registration document. This provides direct information on the numbers and models of vehicles sold to private individuals. The current price estimates are derived by multiplying these data by trade information on list prices, together with estimates for any additional 'on the road' costs. Estimates for motor cycles are also based on valuing numbers of registrations, with some breakdown by engine capacity. The main problem with this approach is the difficulty of measuring discounts on new vehicles, especially where they are linked to the trade-in value for a previous vehicle. 160

21 Expenditure on used vehicles has two different components, depending on the type of previous owners. For vehicles previously owned by households for private use, only the dealers margins on the vehicles are recorded in household consumption. Data are obtained from the ABI to motor traders. For vehicles previously owned by businesses or for business purposes, the full values of the vehicles as well as any dealers margins are included in household expenditure. The dealers margins are within the total coming from the motor trades inquiry. The values of the vehicles themselves are estimated in the course of balancing supply and demand, using the commodity flow approach to measuring GDP at current market prices. They are, of course, part of the total gross disposals of vehicles (reduction in capital formation) by businesses. Personal imports of motor vehicles by households less exports of any vehicles by the household sector are obtained from the overseas trade statistics used for the balance of payments accounts and are also included in this expenditure category. The present methodology for vehicles was introduced in 1996 and applied back to Previously estimates were derived by subtracting the estimate of fixed capital formation on new cars from the estimate of total spending based on valuing all new car registrations. An annual benchmark of the total value of sales was also available from the ABI. Company owned cars for private use Estimates of the value of the use of company cars for private purposes are part of this component of household consumption. The cars are, in effect, being treated as if they were the subject of financial leases to households (which many are in fact), though the company may acquire the car under a financial lease, the private use is an imputed rental from the company to the household. Data relate to the taxable value of company cars, which is related to list price, engine size and mileage allowable for business purposes, as provided by the Inland Revenue. These are also included, as income in kind, in the production and income approaches to GDP Operation of personal transport equipment Motor vehicle repairs Estimates are made up of two components: repairs financed directly by households and those financed directly by insurance claims. The former are based on the FES. In the case of repairs financed by insurance claims, payments are almost invariably made by insurance companies direct to garages; such payments are not recorded in the FES. For these repairs, estimates are based on payments information from the Association of British Insurers. Motor vehicle spares, other motor vehicle costs and self drive car hire The main source of information is the FES. For estimates of expenditure on the domestic concept, this is augmented by an estimate of foreign tourist expenditure on car hire, obtained from the IPS. Driving lessons Estimates at current prices are based on the projection of a benchmark figure (for 1990) using movements in the number of driving tests and price information from the appropriate part of the RPI. Driving tests Annual estimates are obtained from information provided by the Driving Standards Agency of the DETR. Theory tests were introduced in 1996 to supplement the existing system of practical driving tests; both are included Transport services Rail travel Estimates of household consumption expenditure on rail travel are based primarily on quarterly information on receipts provided to the DETR by the rail operating companies. The information is provided separately for a number of fare categories (such as ordinary and season tickets). Additions are 161

22 made for travel in Northern Ireland. Deductions, based on the National Travel Survey, are made for business expenditure and for general government expenditure. Expenditure on travel through the Channel Tunnel is obtained from the IPS. Buses and coaches Current price estimates of household spending are based on quarterly information on receipts provided to the DETR by the bus and coach operating companies. Additions are made for travel in Northern Ireland. Deductions, based on DETR information (National Travel Survey), are made for concessionary fares, for business expenditure and for general government expenditure. Air travel Separate estimates are made for international air travel (excluding travel to the Irish Republic) and for other 'domestic' travel. For the former, estimates are based on quarterly information on numbers of tourists and average fares (including those on inclusive tours) from IPS (see also Package Holidays). For domestic travel, estimates for travel to the Irish Republic are based on numbers of travellers (converted to passenger-kilometres) and estimates for travel within the UK on direct data about passenger-kilometres provided by the Civil Aviation Authority. The combined total of these two components is multiplied by average fares per passenger-kilometre, obtained from commercial travel agency information covering most airlines. Finally, an estimate is deducted for the large part of this total, which represents business expenditure. Taxis Estimates at current prices are based on data from the FES and, for foreign tourist expenditure, the IPS. The foreign tourist expenditure is only required for estimating total expenditure according to the domestic concept ; it is omitted for the national concept. Sea travel Estimates are made for a variety of types of travel. For international travel by sea, value figures are based on the IPS. However, because the survey does not cover travel to the Irish Republic or pleasure cruises, separate estimates are made for these two forms of sea travel, based on DETR information about the number of passengers. The current price figures are obtained by inflating the numbers data by estimates of average fares. (For the Irish Republic a typical single fare is taken to be the average.) For cruises a benchmark estimate of an average fare is extrapolated using an index of hotel accommodation prices. For internal and other minor items of sea travel little information is available and estimates are based on the projection of a benchmark. The figures for sea travel also include estimates for expenditure on board ship as well as fares paid. Miscellaneous travel Travel agents' commissions represents one part of total household expenditure on international package tours. This is in three components - air/sea fares, expenditure abroad and travel agents' commission. Estimates of travel agents' commission are based on a special analysis of the IPS relating to people travelling on package tours. Some 10% of expenditure on package tours (excluding fares) is assumed to be commission. See also comments under Package Holidays (below). Removals and storage expenditure starts with constant price estimates derived from an indicator based on particulars delivered to the Inland Revenue for stamp duty purposes following transfer of ownership of land and dwellings, adjusted for local authority housing sales and sales for other tenure types. This information is revalued by the average price of a removal in the base year. Current price data are obtained by multiplying the constant price series by the component of the RPI for miscellaneous household services. 2.8 Communication Postal services Quarterly estimates of expenditure on postal services are obtained from the FES. 162