Courtesy of Huff Po:
George Osborne’s austerity message is set to be dented by the government’s own statistics body, as it prepares to adopt new calculations that mean the UK’s public sector debt will be £100 billion greater than estimated.
The Office for National Statistics will bring in the new calculation this autumn as part of sweeping changes that include estimating illegal activities like prostitution and drug dealing as worth £10 billion to the country’s national wealth.
The UK’s debt will effectively increase from well over £1 trillion by more than £100 billion, or 7.3% of GDP, as the ONS attempts to improve its accounting standards changes introduced by the US, Canada and Australia.
The ONS will bring Network Rail’s debt onto the UK’s books and also stop classifying the state’s stakes in the Royal Bank of Scotland and Lloyds as liquid assets that can be sold off quickly.
But in good news for the coalition, the ONS will give the UK’s GDP a boost of up to 5% (£75 billion) by reclassifying research and development as capital spending rather than a cost of production.
Britons will also be shown to be bigger savers than currently thought as the ONS will count pensions as present income, which will increase the savings ratio – charting how much is saved against how much is spent – by about 5%.
The planned change in the measurement of the country’s debt comes as MPs warned that the country’s deficit could be £185 billion, over twice as high as the figure used by chancellor George Osborne..
PAC chair Margaret Hodge said it was “hard to understand why the government debt and deficit highlighted in the whole government accounts differ from those reported in the ONS’s national accounts.”
“According to the former document, compiled on the basis of well-understood accounting standards, the UK’s in-year deficit for 2011-12 was £185bn. The national accounts used by the chancellor put the figure at £90bn.”