Recommendation 26

HM Government Acknowledged

Gross Domestic Product (GDP) remains one of our most important economic indicators. GDP has tended to be closely correlated with employment, incomes and tax receipts making it useful for the government and Bank of England when setting economic policy and managing the public finances. However, the Government recognises that GDP has its limitations and should not be seen as an all-encompassing measure of welfare—something it was never designed to be. Sir Charles Bean’s 2016 Independent Review of Economic Statistics acknowledged some of these limitations. The Government fully supported the recommendations of the Bean Review and, to date, has provided the Office for National Statistics (ONS) with an additional £25m to help implement those recommendations. As a result of this work, the UK has developed world leading Natural Capital Accounts and, last year, the UK became one of the first countries to publish natural capital accounts as part of its National Accounts (The Blue Book). These accounts are consistent with the UN System of Environmental- Economic Accounting Central Framework, and System of Environmental-Economic Accounting Ecosystem Accounting. Additionally, the ONS has published human capital estimates for 2004-2018 as part of their wellbeing measures. The Dasgupta Review sets out how a broader measure of ‘inclusive wealth’, comprising natural, human and produced capital, can provide insights into a nation’s sustainable economic progress over time. In response to the Review, the Government will go further to deliver a nature positive economy, including by working with ONS to improve the way nature is incorporated into our national accounts. HM Treasury will provide further funding to the ONS to improve its natural capital estimates. This will improve their relevance for policy making and ensure continued consideration of a broader measure of economic activity than just GDP.