UK economic well-being is improving, says ONS

The financial well-being of UK households improved last year - but overall it is not much better than it was five years ago - according to the Office for National Statistics (ONS)

In a series of new measures, the ONS is seeking to quantify economic well-being, as well as economic growth.

Real Household Disposable Income (RHDI) per head increased by 1.9% in the year to December 2014.

However, the measure is only up by 0.2% from the second quarter of 2010.

RHDI - which records household income after tax, and is adjusted for inflation -is the measure favoured by the chancellor, George Osborne.

The ONS also reported a rise in households' optimism about their finances.

In December 2014, the ONS survey showed a balance of -5.2, meaning that the number of people who thought their financial situation was getting worse outweighed the number seeing an improvement.

However, that figure was an improvement on a year before, when the balance was -7.6.

The series of data was first published by the ONS in December 2014.

Alternatives

Household spending has also risen, according to the ONS.

Real household spending - after adjustments for inflation - rose by 0.3% in the year to December 2014.

And it has risen by 3% since the coalition government came to power in 2010.

All these measures were designed as alternatives to quantifying the UK economy by Gross Domestic Product (GDP) - which measures production, and the income it generates.

Such an approach was first suggested by the Nobel Prize-winning economist, Joseph Stiglitz.

In 2009, he concluded that as well as looking at the performance of the overall economy, it was important to look at the economics of individual households.

In measuring economic well-being, three particular problems are associated with GDP:

• It includes depreciation on goods such as cars. But most people would not consider that the falling value of their car contributes to a worse financial position

• Not all income measured by GDP goes to UK residents. Some is taken by foreign investors - while UK residents also take income from investments abroad

• GDP tends to increase as the population grows, so it needs to be measured on a "per head" basis.