BRITAIN’S economy is as much as five per cent bigger than previously thought, the Office for National Statistics (ONS) said yesterday.
Changing measurements of areas like business investment and pensions savings will reveal huge changes in the economy compared with previous estimates, according to ONS presentation slides seen by City A.M.
Firms’ research and development will be counted as capital investment, adding around £25bn to nominal GDP each year.
The government’s contributions to its workers’ pensions will also be counted. Currently those future payouts are not always included in official figures, as the money will not be paid out for several decades.
But under new rules the government will have to treat the pension liabilities in a way more similar to private firms which have to set the money aside.
As a result the change will increase the government’s wage bill. In the 2012-13 financial year, the change would have added £2.5bn to government spending – and the deficit.
Changes to the way pensions are treated will also show Britons save more than has previously been estimated.
Money invested into funded, defined benefit pension schemes will now count towards the savings ratio, adding 5.5 percentage points to the measure.
At the end of 2013 officials estimated the savings ratio at 5.1 per cent of households’ disposable incomes. By including pensions in the ratio, Britons will appear to be saving more than twice as much a previously estimated.