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UK inflation was overstated by 0.1 percentage points in April owing to an error in tax figures provided by a government department, the Office for National Statistics said on Thursday, in the latest blow to confidence in the quality of economic data.
Annual inflation would have been 3.4 per cent in the month, according to the corrected data, rather than the 3.5 per cent initially reported. Economists polled by Reuters had expected a rate of 3.3 per cent, up sharply from 2.6 per cent in March.
The correction affects one of the UK’s most market-sensitive economic data series, an indicator that has particular significance to government bond markets, currencies and Bank of England interest rate decisions.
The BoE has been vocal about the difficulties it is experiencing deciding the path for monetary policy given uncertainty about the accuracy of official data, in particular labour market figures.
Last month Sir Ian Diamond, stepped down as head of the ONS citing “ongoing health issues”, weeks after ministers commissioned a review of the agency’s leadership, culture and structure.
Economists were taken aback by the leap in the vehicle excise duty component of inflation when inflation data for April was published on May 21. Traders trimmed back bets on BoE rate cuts in the wake of the figures, as some saw inflation proving stickier than the central bank had expected.
The ONS said on Thursday that the Department for Transport had supplied the incorrect data as part of the process of calculating inflation.
This had overstated the number of vehicles subject to VED rates applicable in the first year of registration, which led to headline consumer price and retail price indices being overstated.
“No other periods are affected,” the ONS added in a statement. In line with its revisions policy, it said, the April figure would remain at 3.5 per cent in its historic series, but the ONS will be using the correctly weighted data from figures from May 2025 onwards.
The DfT’s published official statistics were unaffected, the ONS added.
The ONS noted that the error was isolated to one set of data used to calculate the VED index, but the agency added that it “is reviewing its quality assurance processes for external data sources in light of this issue”.
The DfT did not immediately respond to a request for comment.
Conservative shadow chancellor Sir Mel Stride said it was “thoroughly reprehensible” that the ONS was not able to give more accurate data.
He singled out problems in the agency’s labour market survey, which has been beset by inaccuracies stemming from declining survey responses underpinning figures including the unemployment rate.
“I don’t think that’s acceptable actually, and I’m surprised it has been allowed to persist for as long as it has,” he told an event at the Royal Society of Arts in London.
Asked about Stride’s comments, a spokesperson for the ONS said: “We are working hard to address pressing issues and will publish a plan shortly to outline the restoration of our key statistical outputs.”
The long-running problems with the labour market survey have raised doubts over key indicators such as unemployment, inactivity and productivity. But errors have also been found in other ONS data releases, including trade figures.
“The trouble for the ONS is that this is part of a developing pattern of weakness which further undermines confidence,” said Tony Travers, a professor at the London School of Economics. “Given data and analytical advances in recent decades, this kind of failure is all the more problematic.”
Rob Wood, economist at consultancy Pantheon Macroeconomics, said that while budget restrictions had compromised the ONS’s ability to produce accurate statistics, “errors . . . are piling up and have now at one time or another affected all the real key economic statistics of inflation, unemployment and GDP”.
While the 0.1 point error in April’s inflation rate would not “make or break” the organisation’s credibility, said Wood, it was “crucial that the ONS climbs the mountain of restoring trust in its statistics”.
BoE governor Andrew Bailey, when asked at the House of Commons Treasury committee on Tuesday about the impact of confidence in official data on central bank’s rate decisions, said: “It does have a bearing on it.
“We certainly spend more time on it, and that’s obviously what we should do, given the uncertainty.”
