The financial well-being of UK households has improved in 2014, however, it also revealed that the overall situation has not significantly improved compared to five years ago, according to a report by the Office for National Statistics (ONS).
The report showed that Read Household Disposable Income (RHDI) had increased by 1.9% in the year to December 2014. However, the figure arrived at was only 0.2% greater than that from the second quarter in 2010. The RHDI accounts for household income after tax and includes an adjustment for inflation.
Additional information published by the ONS revealed that optimism about the financial situation in UK households has improved in the year to December 2014. The figure was recorded at -5.2, revealing that the amount of people who believed their financial situation was becoming worse still outnumbered those witnessing an improvement. However, that figure was an improvement compared to 2013, when the balance was -7.6.
The ONS also stated that household spending has risen by 0.3% in the year to December 2014. It has increased by 3% since the coalition government came to power in 2010.
The ONS are implementing new variables to measure the level of economic growth and economic well-being. Economic well-being is a subset of the measurement of national well-being and recognises that many dimensions of well-being are outside the material sphere.
When measuring economic well-being, three issues are associated with GDP:
Firstly, comprised in the figure is the depreciating value commodities such as cars. However, most people would not consider that the falling value of their car or other commodities worsened their financial position.
Secondly, some of the income recorded when accounting for GDP goes to people living outside of Britain, such as foreign investors. In addition, some British citizens receive income from foreign investments.
Thirdly, GDP tends to increase as the population grows. To get a more accurate picture of the economic situation, it should be recorded as “per head”.