What has Britain's growth rate really been?

<p>In a separate article (Forsyth and Kay, Fiscal Studies, No.3), we have described the gains to the British economy from the exploitation of North Sea oil reserves. These gains arise partly from the value of oil output itself, and partly from the improvement in the terms of trade which result from the rise in the value of sterling. Because of the conventions adopted in the construction of national income. Over the period 1977-80, the reported growth rate of the UK under-estimates the increase in real consumption and investment by almost five per cent. Although the issues involved are somewhat technical, they are therefore central to the analysis and description of current economic events. In this article we describe the problems with the existing measure and present estimates of the UK growth rate over the last 10 years with suitable adjustments.</p>