British people “lack a basic understanding” of economic statistics such as unemployment or the government’s deficit, and at the same time mistrust official data, a hard-hitting report funded by the Office for National Statistics concluded on Wednesday.
The report, produced by the ONS’s think-tank, the Economic Statistics Centre of Excellence, found that a large proportion of the people they surveyed had little ability to judge how well the government or the UK economy was performing.
People were also “instinctively sceptical and cynical about any data at the moment”, according to Johnny Runge, a senior researcher at the National Institute of Economic and Social Research and the lead author of the report.
“They think [data] can be twisted to support any narrative,” he said, adding that they “regret” their inability to distinguish between good and bad uses of data.
The research, which surveyed 1,665 people online and followed up with in-depth focus groups of 130 people, found that the public’s financial understanding was better in topics that had direct relevance to their daily lives, such as interest rates and inflation, than for more abstract concepts such as gross domestic product or unemployment levels.
Before being asked questions to test their understanding, few people were confident in their abilities, but even fewer got simple questions right. Older people performed better than younger people, men scored more than women and those with more education got higher marks than those with less.
Only 47 per cent could identify that growth of GDP by 1 per cent meant that the size of the economy had increased by 1 per cent when the other possible answers related to the value of the pound, exports, wages, taxes or the government’s budget.
Few had a wider understanding of how the economy’s growth performance might affect them and thought GDP was “economic jargon and a turn-off”, according to Mr Runge.
The responses to questions on unemployment will prove more of a concern to the ONS and politicians because less than 40 per cent thought a description of unemployment at around 4 per cent was very accurate or fairly accurate. Unemployment was at that level when the research was carried out.
Many of the focus group participants believed that unemployment statistics were collected from benefit claimant data — as they were in the 1980s — and could be fiddled by ministers changing their definition.
In the survey, 49 per cent of the population thought stay-at-home parents with no job and not looking for a job were unemployed. In official statistics across the world, they are considered “inactive” because they are not seeking employment.
Mr Runge said most people thought it was possible only to be employed or unemployed and there was no third category of inactive people, which also includes people unable to work and students.
He said that economists, the media and statisticians should try to understand better how the public understands words such as “unemployment” because differences between popular understanding and formal definitions can fuel mistrust.
“The solution isn’t that people should be taught economics in schools, but that statisticians and economists should become better at communication and should listen more to the public’s perception and their parallel understanding of the statistics,” Mr Runge said.
On the deficit, 70 per cent identified that the UK government had one, but only 40 per cent could then explain that this meant that public expenditure exceeded tax revenues.
The report comes after the Financial Times announced it would launch a charitable foundation to support financial literacy and inclusion early in 2021 to help people better manage their own money and their lives.
In response to the report, the ONS said: “This report raises some interesting questions and highlights the challenges all communicators face when explaining complex economic concepts.”