The national accounts

Introduction

The United Kingdom uses the European System of Accounts to structure its macroeconomic data. This is a highly developed set of accounting rules that specifies the identities, or adding-up constraints, that link gross domestic product to its components. It can be thought of as a data model - a set of rules by which raw data are processed to increase usability or reduce complexity.

We have designed macroflow to present a natural mapping to the national accounts. Specifically, the identities for a simplified system of national accounts are presented front and centre. Each series in the system of accounts has a page at which both it, and the identities in which it enters, can be viewed and downloaded.

Users can, therefore, access the national accounts data in macroflow by navigating through the relevant accounting identities. At the same time, we realise that different users access information in different ways, so there are also alphabetic lists of series and identities, as well as a search tool.

A simplified system of national accounts

Allocation of income

The simplified system of national accounts presented in macroflow is a subset of the European System of Accounts. We have included those series and identities which are most likely to be needed on a day-to-day basis by students, researchers, and journalists. The full structure of the European System of Accounts can be found here; the structure of the simplified system in macroflow can be summarised in three tables.

These tables split different types of transactions between economic sectors. In macroflow these sectors are households, non-profit institutions serving households (e.g., charities and universities), public non-financial corporations, private non-financial corporations, financial corporations (both public and private), general government (which includes central and local government), and the rest of the world.

The first summary table, shown below, is the allocation of income table. This contains the gross income flows accruing to each sector as a result of the production of goods and services:

In these tables (and the series codes), 'hh' refers to the household sector, 'npi' to non-profit institutions serving households, 'pc' to public non-financial corporations, 'nfc' to private non-financial corporations, 'fc' to financial corporations (public and private), 'gg' to general government, and 'rw' to the rest of the world. So, for example, the gross primary income of the household sector GPI_hh is equal to compensation of employees W_hh plus incomes that cannot be neatly separated between wages and profits O_hh plus net property income ZN_hh.

Most of the flows in the allocation of income table are gross of redistribution. The exception to this rule is net property income, which summarises any redistributionary transactions which are related to the ownership of capital. For example, dividend payments to households from private non-financial corporations will show up as a positive entry in ZN_hh and a negative entry in ZN_nfc. The column sums in the allocation of income table, therefore, yield the gross primary incomes of each economic sector after redistribution due to property ownership, but prior to all other types of redistribution.

As every net property transaction involves an equal and opposite entry for each sector, net property incomes sum to zero for the economy as a whole. The remaining entries in the final column of the allocation of income table yield the first recognisable identity from textbook macroeconomics,

Y = W + P + O + TPS,

i.e., gross domestic product is equal to the sum of labour incomes, gross operating surplus, incomes that cannot be neatly separated between wages and profits, and taxes on production less subsidies. Finally, note that the rest of the world is treated differently from the domestic sectors in the allocation of income table, as GPIN_rw is the net primary income accruing to foreign nationals earned in the UK. Interestingly, while labour incomes, taxes, and property income are split between the domestic and foreign sectors in the European System of Accounts, there is no equivalent split for gross operating surplus.

Distribution of income

The next table is the distribution of income table. The first row contains the gross primary incomes of each sector, which are carried over from the allocation of income table. The subsequent rows contain various types of payments by which primary incomes are redistributed between sectors, to arrive at gross disposable income:

As with net property income in the allocation of income table, all of the redistributionary transactions in the distribution of income table involve equal and opposite entries for each sector, and therefore sum to zero. The sum of gross disposable incomes is therefore equal to the sum of gross primary incomes, which is equal to gross domestic product. Unlike gross primary income, gross disposable income corresponds fairly closely to what most people think of as income, that is, the funds that sectors have available to spend without having to borrow or sell assets.

Some of the entries in the distribution of income table are not completely intuitive. For example, net social contributions include national insurance payments, even though these are commonly thought of as a type of tax. Household net social contributions SCN_hh and benefits SBN_hh include payments to and from pension funds, which are offset by financial sector flows. The catch-all series for net other transfers includes items like non-life insurance claims, which are paid from the financial sector to the non-financial sectors of the economy.

Uses of income

The final table in our simplified system of accounts is the uses of income table. This tells us how each sector uses its disposable income to purchase consumption goods, accumulate physical assets, or accumulate financial assets:

The final column of this table yields the textbook GDP expenditure identity,

Y = C + I + NX.

Note that capital transfers are included in this table, rather than the distribution of income table, and that the difference between a sector's gross disposable income and its total expenditure yields that sector's net lending position.

The only entries in the uses of income table whose meaning might not be completely clear are the 'ADN' entries and the 'PADJ' entries. The first of these is the net acquisition of non-produced non-financial assets by each sector. These series amalgamate the purchase and sale of natural resources such as land, mineral and energy reserves, as well as contracts, leases, and marketing assets.

The pension adjustment series are even less intuitive. As noted above, payments to and from pension funds are recorded as a part of net social contributions and benefits in the distribution of income table, and so the net flow of pension payments from financial corporations to households affects both sectors' disposable incomes. This makes sense from the point of view of most pensioners, who generally think of pension payments as a type of income. However, pension payments often involve the sale of financial assets, and these sales are a type of net lending. The pension adjustment series PADJ_hh, PADJ_fc and PADJ_rw exist to avoid double-counting, in which flows of pension payments between households and financial corporations are counted in both the disposable incomes and net lending of those sectors.

Miscellaneous identities

The structure of the simplified system of national accounts in macroflow is summarised in the three tables above. Aside from the series in these tables, you can also find breakdowns for some of the series. For example, we provide a breakdown of gross capital formation into gross fixed capital formation, changes in inventories, and acquisition less disposal of valuables across each sector of the economy.

If there are any breakdowns that we do not include, but you would like to see, just let us know and we will try to include them in the next update.