Towards a single index of local and national sustainable wellbeing

This project will explore the development of wellbeing indicators at the level of lower tier local authorities (LTLAs).

It will produce both “rapid” indicators, providing a basis for exploring how consumption is changing at high frequency on an LTLA basis, and a fuller long-term indicator which reflects life expectancy, health, the local environment and local consumption. The valuation of the local environment will be carried out by examining its possible influence on local well-being.

These two outputs are complementary to each other. The first indicator will draw on FABLE credit/debit card data and will provide a guide as to how well this data relates to survey measures of consumption. The second indicator will complement the Indices of Multiple Deprivation. These latter indices are designed to focus on the most deprived parts of the community and are less satisfactory as indicators of the wellbeing of the average member of the population. They are updated only intermittently, with the 2010 indicators only recently replaced by indicators for 2019.

Small area techniques
The first part of the project uses small area techniques. The Living Costs and Food Survey (LCFS) provides consumption estimates by LTLA. As the main covariates, it will use transactions data provided by FABLE Data. It will calculate moments for local spending on food and alcohol, clothing and personal effects, furnishings, health, transport and travel, recreation and culture, restaurants and other goods and services.

Spatial homogeneity
A key question to be answered is whether the relationships between card data and spending measured by the LCFS are spatially homogeneous. The research will also explore the relevance of the expenditure card data by examining how far additional variables such as local house prices, local household incomes and local electricity consumption add to the explanatory power.

Wellbeing
To look at wellbeing, the research assumes that utility is logarithmic in public and private consumption and depends on leisure time. The well-being indicator will be based on estimates of expected lifetime utility after making an adjustment for health status. The consumption data will come from LCFS and estimates of hours worked will be inferred from the APS (Annual Population Survey)/LFS (Labour Force Survey). Data on healthy life expectancy and the proportion of time spent in good health will be used to infer the health status of men and women by age in each upper tier local authority (UTLA). Survival probabilities will be derived from the life expectancy estimates available by LTLA.

Public consumption per capita
Data on public consumption per capita will be derived from the population estimates and the national accounts figures for public consumption and the consumption of nonprofit institutions serving households. The number of households is measured from APS.

Leisure time in terms of consumption
The calibration of leisure time in terms of consumption needs an estimate of the national wage bill, provided by the national accounts, together with estimates of private consumption and the allocation of time between work and leisure for people of working age. Consumption per effective household member is derived from the national accounts and the LCFS, while working time is estimated from the LFS. The household count again comes from APS.

Environmental effects
Environmental effects will be valued from the Understanding Society UK Household Longitudinal Study. This will provide a well-being indicator which can be explained by household income (adjusted for size) and the local (MSOA) environment.

The project will provide ONS with a means of producing timely local area estimates of consumption based on big data rather than apportionment. It will also offer a viable means of combining consumption data, health and survival data and also data on the value of the environment into a single local indicator of well-being. Further extension of the project may be possible to include further effects such as costs of crime and fear of crime at a later stage. The project may also enhance the range of small-area methods available to ONS.

Timely local indicators of consumption will be of interest to anyone concerned with the performance of the local economy. Indicators which combine a measure of life-time consumption with survival and health data are also likely to be of interest to anyone concerned about local differences in living standards across the country.