Bank chief to head earnings data inquiry

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The Independent Online
THE CHANCELLOR of the Exchequer has asked the deputy governor of the Bank of England and the head of the Treasury to conduct a wide- ranging review of the official earnings data, it emerged yesterday.

Mervyn King, deputy governor, and Sir Andrew Turnbull of the Treasury will work with Martin Weale, director of the respected National Institute of Economic and Social Research, to try and establish the true nature of trends in UK earnings.

Bank and Treasury officials are said to be furious about recent revisions to the earnings data - one of the most important indicators used by the Monetary Policy Committee (MPC) when setting UK interest rates.

It is feared the MPC may have wrongly raised rates in June on the basis of data supplied to them by the Office for National Statistics (ONS) - the independent agency responsible for compiling the data.

In a letter to Giles Radice MP, chairman of the Treasury Select Committee, Chancellor Gordon Brown says: "Given the scale and impact of these revisions, I believe the proper course is to have an external review."

Meanwhile, the ONS said it had appointed its own expert, Ray Chambers of Southampton University, to "quality check" its statistical techniques. The controversy surrounds two revisions to official statistics - one on 6 October and one on 14 October.

On 6 October, the ONS took the unusual step of revising earnings growth data in advance of its regular labour market briefing. Earnings grew by 5 per cent in June and by 5.2 per cent in May, the ONS said, not, as previously thought, by 4.7 per cent and 5 per cent. On 14 October, the ONS changed the numbers again. The June figure was revised up to 5.2 per cent, while the May figure was cut to 5 per cent - the same number as first published in the summer.

More significantly, on 14 October the ONS also altered its estimates of earnings growth earlier in the year. According to the original numbers, earnings growth had been above the critical 4.5 per cent threshold throughout 1998, peaking at 5.4 per cent in April. According to the new numbers, earnings growth did not creep above 4.5 per cent until the spring, and peaked at 5.2 per cent in June.

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