ONS revision to GDP measures to record huge boost to UK economy

In September the ONS will revise how it calculates GDP figures. It will be the first shakeup of the important economic measure for 15 years.

The changes are far reaching and will seriously alter how we view our economy.

So six months before the next general election, the revised figures will give a huge boost to the economy, on paper at least, showing a higher level of public debt, and a greatly increased savings ratio.

Overnight, the UK economy could grow by up to 5%.

Some of the changes include how things like pension contributions, illegal drug production, money from charities and military hardware spending affect the economy.

The figures will see the measure of household savings double, while the changes will likely be applied to previous years which will also see an upwards revision, according to the FT. This will bring into question our entire understanding of how the UK weathered the financial downturn.

The figures will present future pensions rights as though they were current income. This will drastically increase the measures of household income, thereby raising the savings ratio, even though no change will actually have occurred.

The new system will also re-categorise research and development for manufacturing, which will now count towards GDP, rather than being viewed as a cost of production.

A similar approach is also going to be taken for military hardware building which will likewise be “capitalised”, and viewed as contributing to the economy, rather than being an expense.

The measures will put the UK’s GDP calculations on a more even footing with those in the US, Australia and Canada.

Some illegal activities will also be accounted for, with up to £10bn being added to GDP measures from the illicit production of drugs such as marijuana.  

Furthermore, a recalibration of charities’ activities will also “add” £25bn to the economy.

The ONS has announced the changes in an unusual “Storify” format.

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