Counting drugs and prostitutes - a political gift?

FRIDAY 30 MAY 2014

Britain's economy will get a £10bn boost when prostitution and drugs are included in GDP figures. But is there a moral equivalence between such services and sectors like agriculture and publishing?

Drug dealers and prostitutes will have their economic contributions included when Britain calculates its gross domestic product (GDP) from September this year. It is one of a series of changes to how Britain accounts for its GDP, bringing Britain in line with international standards and adding a potential 5 per cent growth.

The Office of National Statistics (ONS) estimates that drugs and prostitution generate a sum of £5bn per year. The move to include such calculations is part of new EU ruling which aim to bring Britain's accounting system in line with other countries including US, Canada and Australia, which have already adopted them.

Others financial contributions, including charities, universities and trade unions, will also be included.

But counting the contributions of dealers and brothels has generated the most headlines. Some argue that there is a moral flaw in doing so: including them gives the impression that they hold the same levels of economic validation as other sectors, such as agriculture, the hotel industry and publishing - which each contribute around the same sum, according to the ONS.

However, there could be gremlins ahead. When the US adjusted to this system last year, the calculation automatically added 3.6 per cent to the size of 2012 GDP. Italy introduced the rules last week, estimating that sex and prostitution added between 1 and 2 per cent to its GDP.

And in 2006 when Greece revised its figures to include drugs and money laundering, it saw an overnight growth of 5 per cent, a figure that Brussels subsequently rejected. A few years later its economy collapsed.

Political leverage

Whatever happens, the move will be something of a political gift for the Tories. Basing their appeal for re-election on the idea that they have repaired the economy, this adjustment in September - which, granted, will be reflective of 2009 - will nonetheless play to the mood music.

"The timing is, of course, has convenient political implications that will help the government's argument," Phillip Blonde, of the think tank ResPublic told Channel 4 News.

But he suggests that for it to be truly accurate, it should not just include the "black market of the criminal economy" but also "the levels of tax lost to offshore wealth".

For voters, though, the changes should serve as a timely caution. The cacophony of backslapping may be heard in Westminster, where on Friday it emerged that Britain's economic prospects are at their brightest in more than a decade.

George Osborne will want to persuade the country he is the only safe pair of hands to steer the economy in the years ahead, while Ed Miliband will argue that the growth is simply not being felt.

When these new rules take effect in September, voices will invariably louden. But it should also remind that numbers are only as useful as the lens through which they are viewed. As Mark Twain famously remarked: "Facts are stubborn things, but statistics are pliable."