While the economic well-being of UK households has improved, it is still not significantly better than it was five years ago, according to the Office of National Statistics (ONS).
Using a new set of measures, ONS is able to measure economic well-being as well as economic growth.
Real Household Disposable Income (RDHI) increased 1.9 per cent per head during 2014. However, this was only up by 0.2 per cent on the figure for the second quarter of 2010, five years ago.
Real Household Disposable Income is the measure favoured by Chancellor George Osborne. It records household income after tax, adjusted for inflation.
According to the Office of National Statistics, adults are also feeling more optimistic about their household finances.
In December 2014, the ONS reported a figure of -5.2, which meant that the number of people who reported feeling optimistic about their personal finances was just outweighed by the number who felt that their finances were worsening. However, the year before that figure was -7.6.
According to the ONS, household spending has also increased. Real household spending, adjusted for inflation, rose by 0.3 per cent during 2014 and by 3 per cent since May 2010, when the current coalition government came to power.
These measures for quantifying economic well-being were first suggested by economist and Nobel Prize winner Joseph Stiglitz, who said that it was important to look at individual household finances as well as the economy as a whole.
According to Stiglitz, measuring Gross Domestic Product alone is problematic. It records the depreciation of cars, for example, which is not usually connected with worsening household finances. Furthermore, not all of the GDP goes to UK nationals. Some is taken by investors from overseas and some UK residents receive income from foreign investments. Finally, GDP goes up as the population increases and so should be calculated per head.
