The effective measurement of the public sector has traditionally been regarded as a challenge for in the production of National Accounts and GDP; the principal reason being the outputs of the sector are either provided free of charge or at a price which does not fully relate to the costs involved in the production of services. International guidance had previously suggested that, in the absense of any meaningful monetary output, that the output of the public services should equate to the costs of providing the services; often referred to as the "inputs=outputs" principle. Such an approach provides a concrete measure of output which is relatively simple to measure but it does entail that productivity is assumed to remain absolutely constant through time.
Until recently, the Scottish GDP measures used employment within each service as a proxy for value added in constant prices. The approach proposed in the Atkinson Review (2005) centres upon the use of direct measures of output e.g. numbers of pupils taught in schools or numbers of fires attended. Such measures should cover all aspects of the service provided (often multiple measures will be required to measure a single service) and take account of quality change through time e.g. exam performance. Where multiple measures are used to measure a service, these measures are weighted together to form aggregate measures using the relative costs of delivery (cost-weighted activity indices).
These changes were made largely in response to current international national accounts guidance and, in particular, the Atkinson Review. The final report was published on 31 January 2005 and made 54 recommendations to improve the measurement of public services output and productivity. These included nine guiding principles to provide the framework for methods to measure public services. The report concentrated on the measurement of output in four key areas: Education, Health, Social Protection and Public Order and Safety.
In October 2007, major changes were made to the series used in the measurement of the Scottish Government's quarterly GDP series within the public services and related areas.
Public administration and defence
Within this sector, three series were revised. Employment in the Civil Service in Scotland is now measured in full-time equivalent units by grade and weighted by average salaries in each grade. This is highly aligned to the equivalent measure used in the compilation of the UK quarterly GDP measure. A new direct output measure for Justice services activities was introduced which uses the numbers of court cases in each type of court weighted by cost; numbers of social work orders, weighted by costs and; prison population information. Finally, a new direct output measure for fire services has been introduced which uses the numbers of fires attended by type, weighted by cost; number of hours engaged in fire prevention activities; and other services. Similarly to the equivalent measures for the UK, the remaining services (defence, police) continue to use employment data as a proxy whilst new measures are developed.
The previous education series were comprehensively refreshed with improved measures of output. Primary and secondary education is now measured using pupil numbers, adjusted by attendance. This raw output measure is then quality adjusted with attainment information which is weighted by expected future earnings to capture the relative market value of different levels of qualification. New series covering attendance in special education, initial teacher training and nursery education have also been introduced.
Although strictly falling outwith the public services, new measures of further and higher education were also incorporated as a replacement for staff numbers in these institutions. For higher education, full-time equivalent student numbers are now used and, within further education, the number of student-hours of education received by type of course are used which are weighted by the relative costs of delivering each type of course. Further development work will be undertaken to measure the volumes of research activity undertaken in these institutions.
Health and Social work
Health services are now measured using a deflated expenditure on a large number of treatments and services for the period 2001 onward. Due to data unavailability, estimates prior to 2001 continue to use employment information and are spliced with the newer deflated expenditure information to avoid discontinuity in growth rates. Further development work will be conducted over the next 12 months towards establishing a direct measure of output for this service. New direct measures of social work outputs were introduced which measure the range of activities performed by adult and children's services weighted by the costs of delivering each service.
Work is currently underway to incorporate direct measures of heath output using a constellation of different treatments and activities, weighted by the relative costs. It is intended that these new measures will be incorporated into the 2008 Quarter 3 publication of quarterly GDP for Scotland (January 2009).
New Measures of Public Sector Output - Presentation given to the Scottish Economic Statistics Consultants Group (SESCG) October 2007
Developing a Quality-Adjusted Output Measure for the Scottish Education System - Paper delivered to the OECD workshop in Paris on public sector productivity June 2007
Proposed New Education Measure for Scottish GVA Series - Presentation given to the Scottish Economic Statistics Consultants Group (SESCG) October 2007
Implementing Atkinson in Scotland - Presentation given to the Scottish Economic Statistics Consultants Group (SESCG) January 2006
Discussion of the Public Sector - Presentation given to the Scottish Economic Statistics Consultants Group (SESCG) January 2006
Inplementing the Atkison Review in Scotland (June 2005) - The official Scottish Executive Implemention Strategy for the recommendations of the Atkinson Review.
Implementing the Atkinson Review in Scotland - Discussion paper given to the Scottish Economic Statistics Consultants Group - May 2005