For the first time in 15 years, the Office for National Statistics is preparing to rip up the way it measures Britain’s economy, with the new techniques showing a huge increase in the size of the economy, a higher level of public debt and a much increased savings ratio. There is also a good chance that the statisticians will significantly revise up growth recorded in the economy in 2012 and last year.
The reforms will have the potential both to overturn Britain’s reputation as a spendthrift nation and significantly improve the poor productivity performance of the past few years.The ONS will introduce new global accounting standards to gross domestic product and related measures in September, following similar changes already introduced in the US, Canada, Australia.
Under the new system of accounts, research and development spending will count towards GDP rather than being seen as a cost of production, and building aircraft carriers and other weapons of war will also add to the size of the economy. The ONS said the change would add between 2.5 per cent and 5 per cent to the level of GDP, adding £40bn to £75bn to the total.
One of the largest changes, announced by ONS officials on Monday, arises from how savings are measured. From now on, the official figures will count future pension rights as if they were present income.
With Britain one of the few countries to have a large funded defined-benefit pension system, the change will significantly raise measured household incomes, thereby increasing the savings ratio.Officials said the savings ratio would rise “by around 5 percentage points”, practically doubling the current 5.1 per cent and putting it around 10 per cent, far closer to those seen in other European countries.
And, just like that, all you thought you knew is overturned. There are few certainties in this world.