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Economic Well-being
3rd March 2015
Email: [email protected]
Introduction & Welcome
3rd March 2015
Joe Grice
Chief Economic Adviser
Going Beyond GDP
3rd March 2015
Diane Coyle
Enlightenment Economics
Peak GDP
Kuznets vs Keynes
A history of dissatisfaction
A reversal of fortunes
The wedge between GDP and welfare
Beyond GDP?
3 separate concepts, 3 sets of
measurements
• Economic activity
GDP?
Production boundary? Satellite accounts?
• Welfare
Dashboards or single indicator?
• Sustainability
Judgments/predictions about the future
But look at balance sheets/’genuine saving’
Economic Well-being
3rd March 2015
Val Fender
Economic Well-being Branch
What is Economic Well-being
• While it is right that GDP plays a central role in monetary
and fiscal policy, it has long been recognised as
presenting an incomplete picture of how our society is
doing.
• Economic Well-being presents a complementary
framework to shine light on broader socio-economic
measures.
• Economic Well-being recognises many dimensions of
well-being are outside the material sphere.
• Regular quarterly bulletin to coincide with QNA.
The Framework for Economic Well-being
Key Points (1)
• In Q3 2014, GDP per head increased 0.6% compared to Q2 2014 but remains 1.8% below
pre-economic downturn levels. This was a slightly slower growth rate than the 0.7% quarterly
increase seen in GDP.
• Net National Disposable Income (NNDI) per head, which represents the income for UK
residents, has remained broadly flat since Q1 2012 and remains 5.6% below pre-economic
downturn levels
Key Points (2)
• In Q3 2014, household income (RHDI) per head decreased 0.2% on the
quarter, but remains broadly in line with its pre-economic downturn levels.
• However, despite recent improvements, households still consider their financial
position to be slightly worse than a year ago.
Key Points (3)
•
•
In 2012/13, median income fell 1.4% compared to 2011/12 to £23,300, its
lowest level since 2002/03.
Between 2011/12 and 2012/13, there was a slight increase in income
inequality.
Key Points (4)
• In Q3 2014, household spending per head grew 0.8% compared to the
previous quarter – continuing the general upward trend that started in Q3 2011.
Key Points (5)
• In 2013, the wealth position of
the economy as a whole
increased 4.4% to £7.6 trillion.
• In the same year, household
net wealth increased 2.6%
mainly due to an increase in
the value of dwellings.
Next Release
• Next release of Economic Well-being is 31st
March 2015
Wealth
3rd March 2015
Elaine Chamberlain
Household Assets
Data Sources
Figure 5: Net Financial and Non-Financial Capital
Figure 6: Household (Sector) Net Wealth by Assets Type
United Kingdom
United Kingdom
National Accounts
Strengths
• Long time series
• Regular updates
Limitations
• Detail
• Definitions
Data Sources
Table 1: Median Household Wealth
United Kingdom
Year
2006-08
2008-10
2010-12
Source: The Office for National Statistics
Median Wealth (£)
196,700
204,300
218,400
Summary facts on WAS
•
•
•
•
•
WAS started in July 2006
Longitudinal survey – with each wave lasting 2 years
Wave 1 – approximately 30,000 households
Wave 2 onwards – approximately 20,000 households
New Cohort introduced every wave from wave 3
onwards
• Wealthiest 10% of households over-sampled
What does the survey cover
The survey aims to gather an accurate picture of the
economic position of the nation’s households. The
questionnaire covers areas including: •
•
•
•
•
•
•
Savings and investments
Saving for Retirement
Debts
Value of personal possessions
Attitudes and behaviours
Economic activity
Income
Wealth and Assets Survey
Strengths
• Coverage
• Breadth of data from a single source
• Distribution of Wealth
• Longitudinal
Limitations
• Self valuation
• Difficult subject matter
How is wealth calculated?
Distribution of Total Household Wealth
Bottom 50% of households
51 to 90% of households
Top 10% of households
Aggregate Total Wealth in
Great Britain:
The bottom half of
households owned less than
10% of overall wealth.
9.3%
£9.5
Trillion
46.4%
44.3%
The wealthiest tenth of
households owned more than
40% of overall wealth.
Wealth Thresholds
Bottom 10% of households
Total Wealth
< £13,000
Top
1% of
Top 10%
of households
households
Median Wealth
£218,000
Total
Total Wealth
Wealth
>£2,507,000
> £918,000
Regional Distribution of the Wealthiest
Households
South East
15.5%
London
South West
East of England
West Midlands
East Midlands
Wales
Yorkshire and The Humber
North East
North West
Scotland
6.9%
0.0%
2.0%
4.0%
6.0%
8.0%
Percentage
10.0%
12.0%
14.0%
16.0%
Breakdown of Total Wealth, by Components
Wealthiest 10%
Bottom 50%
Private
Net
Net
Financial
Property
Pension
Wealth
Wealth
Physical
Wealth
£68,000
4.8%
£0
12.7%
29.2%
£123,200
30.4%
£18,000
£4,000
56.6%
25.9%
£340,000
£742,000
£400
3.8%
36.6%
£0
Financial Debt
Household Financial Debt
Total £94.7 Billion
Households with Financial Debt
51%
Average Financial Debt
(for households in financial debt)
£3,200
The Extent of Financial Debt
Percentage
100
80
60
40
20
0
1
2
3
4
5
6
7
8
9
10
-20
-40
Financial Assets
-60
Total Household Wealth Decile
Financial Liabilities
-80
-100
£1
- £1 - £1 - £1 - £1
Inheritance
Distribution of Inheritance over a 2 year period
£1.4bn (1.8%)
£0.4bn (0.6%)
£4.4bn (5.9%)
£57bn (76%)
£11.8bn (15.7%)
Wealth and Income
Distribution of total household wealth, by total household income quintile
100%
90%
80%
70%
60%
50%
Wealth Q5 (highest)
Wealth Q4
40%
Wealth Q3
30%
Wealth Q2
Wealth Q1 (lowest)
20%
10%
0%
Q1
(lowest)
Q2
Q3
Income Quintile
Q4
Q5
(highest)
Wealth and Income
Total household wealth, by total household income quintile
1
2
Total income
3
quintiles
10th
Percentile
point
4
3rd
Quartile
MEDIAN
90th
Percentile
point
5
2nd
0
Quartile
500
1,000
1,500
Total Household Wealth £ (Thousands)
2,000
Future Developments
• Wave 3 publications
• Wealth in Great Britain: Wave 4 (Dec 2015)
• User Engagement
• Ongoing Development of user documentation
• User meetings
• Long term future of the survey
• Wave 5
• Wave 6 and beyond
Any Questions?
[email protected]
Economic Well-being: What’s next?
3rd March 2015
Lee Mallett, Claire Shenton and Richard Tonkin
Economic Well-being / Household Income & Analysis
Economic Well-being: What’s next?
• Human, natural and social capital
• Household Satellite Account
• Developments in distribution of income statistics
Human Capital
On-going development
• Continue development in response to
consultation
• Improvements to timeliness
• Continue with improvements to understanding –
release and infographic
• Report on feasibility of regional estimates of human
capital
• Improving understanding of links to other ONS
outputs
Social Capital
• Social Capital represents social connections and all the benefits
they generate.
• It is associated with civic participation, civic –minded attitudes and
values which are important for people to co-operate such as
tolerance or trust.
• ONS developed a framework and set of measures which went out to
public consultation
• 25 measures across 4 key aspects - personal relationships, social
network support, civic engagement and trust and cooperative norms.
• Baseline analysis of social capital in the UK, using the latest
available data, released January 2015.
Ongoing developments
• Develop and refine social capital measures
based on ongoing feedback from users
• Carry out further analysis, in particular to
highlight inequalities in social capital
• Valuation? – difficult to value social capital
overall: 4 different aspects + largely based on
relationships
Natural Capital
• The elements of the natural environment which
provide valuable goods and services to people
such as sub soil assets, clean air, clean water,
food and recreation.
• Valuing nature is necessary so that it is no
longer ignored when deciding, for example,
where to build infrastructure or whether to invest
in pollution saving technology.
Future plans (2015 – 2020)
•
•
•
•
•
•
•
•
•
Broaden and improve natural capital estimates
Water (cross-cutting)
Recreation (cross-cutting)
Semi-natural grassland
Mountain, moorland and heath
Coastal
Urban
Improve the existing accounts
Explore the link with other capitals
Household Satellite Account
• Household production is all unpaid goods and
services produced by households.
• Not taken into account by GDP
 If they were paid for, they would be included in the
National Accounts
 Means by which the influence of changing patterns of
unpaid work in the economy can be measured
• HHSA is a separate from but conceptually
consistent with the UK National Accounts
Household Satellite Account
HHSA: Work to date
• 5 out of 7 methodologies have been reviewed
and updated
• http://www.ons.gov.uk/ons/rel/wellbeing/househo
ld-satellite-accounts/index.html
• Nutrition and Housing Services methodologies
still under development
49
HHSA Estimates
£ billion
50
Improving the timeliness of statistics
on distribution of income
• Effects of Taxes & Benefits on Household Income
• Produced since 1961 & examines how taxes and benefits affect the income of
households in the UK
• Provides estimates of the average taxes paid and benefits received, for different
types of households with different levels of income
• Includes indirect taxes (e.g. VAT) & benefits in-kind provided by state (e.g.
Education, NHS)
Improving the timeliness of statistics
on distribution of income
• ETB currently published 15 months after reference period
• Very strong user demand for more timely statistics
• Improving timeliness without impacting on quality is challenging
•
•
Issues with source data presented early publication for 13/14 data
Currently redeveloping plans for future years
Improving the timeliness of statistics
on distribution of income
• Also investigating ‘nowcasting’ key statistics from ETB
• Nowcasting involves updating existing data to reflect:
• Changes in earnings, labour market participation, population
structure, etc.
• Policy changes, including changes to tax thresholds and
benefit rates, as well as more structural reforms
• Potential to provide early estimates within a few
months of income reference period
• Currently undertaking methodological work – need to ensure
methods robust
• Intend to publish initial report on work in Summer 2015
Small Area Income Estimates and
Households in Poverty Estimates
•
•
Model based estimates of average weekly household income & the
proportion of households in poverty
Available for middle layer super output areas (MSOAs) in England
and Wales
Four income measures:
1.
2.
3.
4.
Total income
Net income
Net equivalised income before
housing costs
Net equivalised income after
housing costs
Poverty measure:
•
% of households with net
equivalised income AHC below
60% of median
Small Area Income Estimates and
Households in Poverty Estimates
• Produced using FRS data combined
with Census & variety of administrative
data sources.
• Income estimates and households in
poverty estimates are usually published
trienially
• Next set of small area income estimates
to be published in Q2 2015
• Next set of households in poverty
estimates will follow after the income
estimates
• To provide the closest link to Census
data, estimates will be for 2011/12
Future Analysis
• 10th March: Poverty and Employment transitions, 20072012
• To what extent is moving into employment associated with
moving out of poverty?
• How do people leave in-work poverty?
• Distribution of expenditure
• What can we learn about how economic well-being has changed
in recent years for different groups?
• Bringing it all together
• Better understanding of overall trends in income and earnings