WIREDGOV

ONS has today published an article setting out the impact on current price GDP of improvements to the National Accounts that will be introduced when revised figures, consistent with Blue Book 2016, are published on 30 June 2016.

By far the largest change comes from improvements to the estimates of imputed rentals – further detail below. This has the effect of raising current price GDP throughout the period but by much more in earlier years than later ones. Accordingly, the combined impact of the improvements announced today will increase the level of current price GDP in 2011 by approximately £8.9bn (around 0.5%) but by £55.5bn (or 6.3%) in 1997.

This upward revision to the level of current price GDP but by declining amounts over time implies downward revisions to the growth rate. Revisions to the growth rate of annual current price GDP range from -0.1 percentage points (1999 & 2001) to -1.2 percentage points (2010). Average annual current price GDP growth between 1997 and 2011 has been revised downwards by 0.5 percentage points, from 4.5% per year to 4.0%.

However, because the main driver to the change is a price effect, driven by improvements to the measurement of imputed rentals, it is not anticipated that these revisions to growth in current price GDP will flow through to real GDP to the same extent as in previous years.

The main improvements announced today are:

• Improvements to imputed rentals. Imputed rentals estimate how much it would cost home owners to rent their own homes. Data from the Living Costs and Food Survey, currently used to estimate imputed rentals, is being replaced with a much more comprehensive data source from the Valuation Office Agency. This improvement adds between £56.8bn (1997) and £15.1bn (2011) to current price GDP.

• Improvements to the estimation of value added tax fraud by including non-complicit fraud. Non-complicit VAT fraud is when individuals or corporations who under or non-report their respective salaries and profits to the tax authorities also choose to hold onto the VAT that they charge to non-complicit customers on their under or unreported activity. Improved estimates of this effect add between £1.1bn (1998) and £2.1bn (2011) to current price GDP. 

• Two minor errors to the measurement of improvements made to dwellings and the agricultural sector within gross fixed capital formation have been identified. The correction to dwellings subtracts between £0.8bn (1997) and £1.9bn (2009) while the correction to agriculture subtracts between £0.7bn (1999 & 2000) and £1.5bn (2009).

• Various other small improvements, including an improvement to the formula used to calculate illegal activities, improvements to the measurement of self-built homes and improvements to the measurement of concealed income. Most of these improvements lower current price GDP, implying a total reduction between them of £5.2bn in 2011.

ONS Chief Economist Joe Grice said:

“The annual update to UK National Accounts – the Blue Book – ensures ONS continues to use the best internationally agreed methods, and the best available data, giving decision-makers the most accurate information about the changing UK economy.

“While these changes announced today significantly reduce the growth rate of current price GDP between 1997 and 2011, they are mainly down to improved estimates of price changes. So it is unlikely they will impact to the same extent on the estimated growth in real GDP.” 

Background notes

1. The full ‘National Accounts Articles – Impact of Blue Book 2016 Changes on Current Price Gross Domestic Product Estimates, 1997 to 2011’ is available here: http://www.ons.gov.uk/ons/rel/naa1-rd/national-accounts-articles/impact-on-gdp-current-price-annual-estimates-1997-2011/index.html

2. ONS has today also published an article highlighting improvements to the Blue and Pink Books, due to be included in June, following developments in the Flow of Funds project. These changes do not impact on GDP: http://www.ons.gov.uk/ons/rel/naa1-rd/national-accounts-articles/the-uk-flow-of-funds-project--improvements-to-the-sector-and-financial-accounts/index.html

3. In addition, ONS has today updated its previously published article explaining the scope of changes to be introduced in the 2016 Blue and Pink books: http://www.ons.gov.uk/ons/guide-method/method-quality/specific/economy/national-accounts/articles/2011-present/changes-to-be-implemented-for-blue-book-2016-and-pink-book-2016.pdf

4. National Statistics are produced to high professional standards set out in the Code of Practice for Official Statistics. They undergo regular quality assurance reviews to ensure that they meet customer needs. They are produced free from any political interference. © Crown copyright 2016. 

   Issued by: Office for National Statistics, Government Buildings, Cardiff Road, Newport NP10 8XG

   Media contact: 
   Tel Media Relations Office    0845 6041858 
   Emergency on-call    07867 906553 
   E-mail  media.relations@ons.gsi.gov.uk

   Website: 
   www.ons.gov.uk 

5. Details of the policy governing the release of new data are available by visiting www.statisticsauthority.gov.uk/assessment/code-of-practice/index.html or from the Media Relations Office email: media.relations@ons.gsi.gov.uk