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Economic Well-being 3 rd March 2015

Economic Well-being 3 rd March 2015. Email: economic.wellbeing@ons.gov.uk. Introduction & Welcome 3 rd March 2015. Joe Grice Chief Economic Adviser. Going Beyond GDP 3 rd March 2015. Diane Coyle Enlightenment Economics. Peak GDP. Kuznets vs Keynes. A history of dissatisfaction.

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Economic Well-being 3 rd March 2015

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  1. Economic Well-being 3rd March 2015 Email: economic.wellbeing@ons.gov.uk

  2. Introduction & Welcome 3rd March 2015 Joe Grice Chief Economic Adviser

  3. Going Beyond GDP 3rd March 2015 Diane Coyle Enlightenment Economics

  4. Peak GDP

  5. Kuznets vs Keynes

  6. A history of dissatisfaction

  7. A reversal of fortunes

  8. The wedge between GDP and welfare

  9. 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’

  10. Economic Well-being 3rd March 2015 Val Fender Economic Well-being Branch

  11. 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.

  12. The Framework for Economic Well-being

  13. 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

  14. 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.

  15. 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.

  16. 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.

  17. 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.

  18. Next Release • Next release of Economic Well-being is 31st March 2015

  19. Wealth 3rd March 2015 Elaine Chamberlain Household Assets

  20. Data Sources Figure 5: Net Financial and Non-FinancialCapital United Kingdom Figure 6: Household (Sector) Net Wealth by Assets Type United Kingdom

  21. National Accounts Strengths • Long time series • Regular updates Limitations • Detail • Definitions

  22. Data Sources

  23. 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

  24. 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

  25. Wealth and Assets Survey Strengths • Coverage • Breadth of data from a single source • Distribution of Wealth • Longitudinal Limitations • Self valuation • Difficult subject matter

  26. How is wealth calculated?

  27. Distribution of Total Household Wealth Aggregate Total Wealth in Great Britain: 9.3% • The bottom half of households owned less than 10% of overall wealth. 44.3% Bottom 50% of households 51 to 90% of households Top 10% of households 46.4% £9.5 Trillion • The wealthiest tenth of • households owned more than 40% of overall wealth.

  28. Wealth Thresholds Top 1% of households Bottom 10% of households Top 10% of households Total Wealth < £13,000 Median Wealth£218,000 Total Wealth > £918,000 Total Wealth>£2,507,000

  29. Regional Distribution of the Wealthiest Households 15.5% 6.9% South East London South West East of England West Midlands East Midlands Wales Yorkshire and The Humber North East North West Scotland 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% Percentage

  30. Breakdown of Total Wealth, by Components Wealthiest 10% Bottom 50% Private Pension Wealth Net Financial Wealth Net Property Wealth Physical Wealth £68,000 4.8% £0 12.7% £123,200 29.2% 30.4% £18,000 £4,000 56.6% £742,000 25.9% £340,000 3.8% £400 36.6% £0

  31. Financial Debt Household Financial Debt Total £94.7 Billion Credit Card FINAL DEMAND OverdraftStatement Households with Financial Debt51% £££ Average Financial Debt(for households in financial debt)£3,200

  32. 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

  33. 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%)

  34. Wealth and Income Distribution of total household wealth, by total household income quintile

  35. Wealth and Income Total household wealth, by total household income quintile 2ndQuartile MEDIAN 10th Percentile point 3rd Quartile 90th Percentile point

  36. 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

  37. Any Questions? Wealth.and.Assets.Survey@ons.gsi.gov.uk

  38. Economic Well-being: What’s next? 3rd March 2015 Lee Mallett, Claire Shenton and Richard Tonkin Economic Well-being / Household Income & Analysis

  39. Economic Well-being: What’s next? • Human, natural and social capital • Household Satellite Account • Developments in distribution of income statistics

  40. Human Capital

  41. 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

  42. 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.

  43. 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

  44. 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.

  45. 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

  46. 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

  47. Household Satellite Account

  48. HHSA: Work to date • 5 out of 7 methodologies have been reviewed and updated • http://www.ons.gov.uk/ons/rel/wellbeing/household-satellite-accounts/index.html • Nutrition and Housing Services methodologies still under development

  49. HHSA Estimates £ billion

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