| LONDON, April 7
LONDON, April 7 The finances of Britain's
households are likely to look a lot healthier later this year,
but not because wages are about to jump. Instead, it will be due
to changes in the way national statistics are compiled.
Britain's savings ratio - the amount put away as a
percentage of after-tax income - is lower than in many other
rich countries, raising concerns about the sustainability of the
country's economic recovery from the financial crisis.
But under European Union accounting changes being introduced
in September, that ratio is set to roughly double, according to
officials from Britain's Office for National Statistics.
The new methodology will add five percentage points to the
ratio - taking it to around 10 percent from the current 5.0
The big rise comes from the recognition of shortfalls in
defined benefit pension funds - many of them run by local
government authorities - as income for holders of pension plans.
Currently, shortfalls in the funds' long-term liabilities
are only included as income - and hence affect the ratio - when
they are eventually made up to pension plan holders.
Under the new rules, the assumption is made that the
shortfalls will be made up and therefore they will be counted.
Joe Grice, chief economic adviser at the ONS, said the
change did not represent a fundamental improvement in the health
of household finances.
"Clearly, reality hasn't changed. It's the way of recording
the reality that will," Grice told an ONS seminar.
But some economists said the new-look savings ratio would
make Britain's recovery appear more sustainable.
"The changes suggest that a significant degree of personal
savings has been omitted from calculations hitherto and this
should give a healthier and more accurate representation of
household finances," said Philip Shaw at Investec.
The savings ratio in Britain rose during the financial
crisis as people built up their nest eggs to cope with the
downturn. But the ratio has fallen in recent months.
Critics of the government, including the opposition Labour
party, say the fall shows how households are struggling to make
ends meet. But some economists say it could be a reflection of
confidence among households that the economy is picking up.
(Editing by Jeremy Gaunt)