Not only is our economy bigger than we thought but we are saving much more. No, this is not the result of anything new that has happened, but rather a change in the way the Office for National Statistics measure things. We are shifting to the European System of Accounts, the legal structure used by other EU countries, and the effect of this will be to add between 2.5 and 5 per cent to the size of the UK GDP.
Before you raise a glass to this, just note that while we are no richer, one effect will be that we will have to pay more into the European kitty, for subscriptions to the EU are based loosely on GDP.
We don’t have detail yet but among the changes are the inclusion of spending on weapons and defence R&D as capital expenditure, and of contributions to defined benefit pension plans as savings. The latter change is important because we still have a large defined benefit pension sector relative to everywhere else in Europe – even if we have done a lot to undermine it in recent years.
The change is common sense because the better pension scheme people have the less they feel the need to save in other forms. The effect will be to push the present published savings rate, just over 5 per cent of GDP, nearer to 10 per cent. One further effect will be to make our consumption rate – the proportion of GDP that we spend – look a bit smaller. While that does not change the country’s dependence on consumer spending to pump up the economy, it makes it look a bit less alarming, as indeed any increase in R&D makes our investment level look better too.
The message here - and it goes for those of us who comment on data as well as those politicians who use statistics as a condiment to sprinkle on their views - is surely that we should look behind the stats. If a number is too good to be true, it usually is. And vice versa.