We confuse the blizzard of official statistics with reality at our peril

Be informed but not blinded by data – the best decisions come to those who make their own luck

Did you know that 31 per cent of the population don’t believe statistics? This, itself, is a figure from the Office for National Statistics (ONS), perhaps to show that its staff have a sense of humour. They certainly need one. The ONS churns out the figures on which government policy is based and battles are fought: the cost of living, economic growth and pay rises. They’re all estimates, but such estimates are used to decide everything from taxes to train fares. And now, it seems, those estimates might have been wrong.

The problem lies with our telephones. We send, and use, a lot of data nowadays – encouraged by the fact that the price of doing so has fallen by about 90 per cent in recent years. But the ONS says it has not factored this in. Given the size of our telecoms sector, this has quite big implications.

By some estimates, it means inflation has been overstated for five years – making economic growth stronger than officials admitted and pay rises not quite as mean as they seemed. The ONS says it won’t be making any revisions, but this episode is a reminder of the extent to which many economic statistics are pieces of educated guesswork.

Worse, some government statistics can be manipulated outright – which is how we ended up with the Private Finance Initiative mess. The contracts were agreed to conceal debt, driven by a desire to manipulate a spreadsheet rather than run the country. They stand today as a prime example of how a statistical trick can vastly change the shape and nature of government.

Nor can statistics allow us to avoid disaster. Just before the 2008 financial crash, the International Monetary Fund performed an in-depth review of the UK economy and declared it to be perfectly in balance. Only later did it admit that Britain had been suffering its worst financial overheating since the crash of the early 1990s, and that its economists had entirely overlooked this at the time.

Just because economic information comes with a decimal point, it doesn’t mean it’s not a stab in the dark. The best experts, such as Robert Chote from the Office for Budget Responsibility, always make this point, saying that their forecasts are almost certainly wrong. They can’t be blamed if politicians won’t listen.

The ONS doesn’t fiddle figures, but it can struggle to measure things. Take the productivity crisis, for example, a topic of endless discussion. Might it be that the real crisis is a failure to measure, or understand, our modern economy? It’s easy to work out money spent on cars, whisky or accountants – but the digital age has broken the link between price and value. Many of us now depend on email and internet search engines, both of which are free. If they weren’t free, how much would we be willing to pay for them? And how do we put a value on that?

The ONS is honest enough to say that it doesn’t really know. Richard Heys, its deputy chief economist, admits that his colleagues are “running to catch up with a bus that is accelerating away from us”. That bus is technology, our new methods of working and the digitised economy.

Cheap accounting software can help us fill in our tax returns, for example, with less need for accountants. We can now book holidays online, and are in less need of travel agents to do it for us. But officials have no idea how to quantify such improvements to the economy. Nor do they know how to adjust for the fact that, using old memory and processor prices, the smartphones we use now would have been worth £1 million in 1990.

Failure to measure all this would be a problem for any country, but is especially problematic for Britain. We’re a world leader in financial technology, for example, the science that allows you to pay by waving a card at a machine, spending less time at the bank, or ping money to friends at the touch of a button. A brave new world, but it might be years before the ONS works how to measure it.

So what to do? How can a chancellor navigate his way to economic growth, if the dashboard is faulty? It’s fairly easy: the trick is to be informed by data, but not blinded by them. Over the years, too many politicians have fallen into a trap of thinking the data will tell them where they’re going wrong and what to do next. They confuse economic forecasts with the future. This can have a paralysing effect, whereas the best decisions tend to come by those who ignore forecasts and make their own luck.

When George Osborne, then Chancellor, started to trim government spending, for example, he hoped to encourage employers to create even more jobs than he was cutting. At first, his plan seemed to end in utter failure; the statistics even showed a double-dip recession. He was urged to accept that his experiment had failed and change course. He stuck to his guns, however, and employers eventually responded, creating eight jobs for each one shed by government. This was to the amazement of economists, precisely none of whom saw this jobs miracle coming.

Or consider Hong Kong: no one imagined it would amount to anything either, when it emerged from Japanese occupation after the war. Its extraordinary rise is down to Sir John Cowperthwaite, a British civil servant who served as its financial secretary.

Cowperthwaite placed his faith in low taxes, free trade, light regulation – and a ban on the collection of statistics. Great errors are made, he said, when politicians place their faith in the “bogus certainties and precisions” of economics. The surest way of making Hong Kong wealthy was to allow money “to fructify in the pockets of taxpayers”. And so it proved.

Last week, Sadiq Khan, the Mayor of London, published an economic study showing that Brexit could make the economy 3 per cent smaller than it would otherwise be by 2030 and attacked the Government for failing to produce its own study. But what would the point be? Economists struggle to predict one year ahead; to try to see a dozen years into the future is a laughable exercise in futility.

Brexit could make us worse off, or a lot better off: it depends on a great many things, but mainly on the quality of political leadership. And there’s no formula for that.