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11 Jun 2008 : Column 130WH—continued

However, it is rare that Ministers make proud declarations about efforts to cut the average commute of the British citizen. The issue of commuting is not just about congestion; it is about adopting a different approach to how and where we work. Taken in hand with people saying that they want more time with friends and family, the case for moving to more flexible working practices is overwhelming. We need to tackle the culture of presenteeism and use technology to cut out unnecessary commutes, which would also have environmental benefits.

Research points to many other factors that have an impact on happiness. Health is a major one, especially and unsurprisingly as we get older. Locus of control is also a common influencer of life satisfaction; when people feel that decisions are made for them and that they have little influence over the events in their lives, they tend to be unhappier.

All that information should be shaping Government policy, which brings me to the action that the Treasury should take. An Ipsos Mori poll found that 85 per cent. of people in the UK agree that

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In order to prioritise improving quality of life, it is essential to measure it and research what affects it, so the first and most obvious thing to do is to create an index of the nation’s happiness. The old adage that “what gets measured gets done” has a ring of truth about it here. No one bothered about GDP 100 years ago, because we did not have the tools to measure it; now it seems to be the obsession of most Governments around the world, although, as I have mentioned, that situation is changing.

A happiness index, including subjective well-being measures and a range of quality of life indicators, would complement GDP as a general measure of progress. It would provide a tangible way of monitoring the Treasury’s goal of creating a better quality of life, and it would help to identify the policy levers to enhance happiness in the future. Importantly, it would also provide greater clarity within Government; many Departments now refer to the concepts of “quality of life” or “well-being” in their mission statements, but there is no common measurement.

In developing such an index, the Government should stick to five key principles: the index should be well grounded in the science; it should be conducted at regular intervals; it should have a large sample size; it should be robust and proof against manipulation; and, ideally, it should be part of an international effort to enable comparisons across nations—hence my early-day motion calling for the Government to work closely with the French as the French develop their index.

Even before such an index is created, the Treasury could integrate existing happiness research into its work. The supporting evidence on well-being should be consulted in allocating resources, assessing new policies and deciding priorities. Much as the environmental or budgetary impact of a policy is looked at, the well-being impact should also be considered.

Mr. John Leech (Manchester, Withington) (LD): I came to listen to this debate to find out what it was about, to be honest, but I agree with everything that my hon. Friend has said. Does she agree that if we were to adopt the strategy that she has proposed, there would be a much stronger case for saving local post offices and other services that the Government perhaps do not see as financial priorities?

Jo Swinson: I agree with my hon. Friend. Post offices are a good example of a local service whose social impact and value to the community are not necessarily captured in financial measurements. He has made his point very well.

These proposals are not always about spending more money, the Minister will be glad to hear. Indeed, taking well-being into the equation may sometimes lead to ending practices and projects that cost money, or implementing policies that save money. A cross-departmental approach is crucial, as sometimes the spending will be in one Department and the saving in another. For example, the Layard proposals on mental health to train new cognitive behavioural therapists to help people with depression get back to work will result in savings on incapacity benefits. I am pleased that the Government have taken those ideas on board, but there
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are many other examples that we are missing out on because we do not measure quality of life in any regular, clear and robust way.

I hope that in her response the Minister will take my views on board and explain whether the Treasury is prepared to look at creating a well-being index for use across Government, and to co-ordinate efforts across Departments to use existing research to improve quality of life, as its mission statement commits it to do.

4.41 pm

The Exchequer Secretary to the Treasury (Angela Eagle): I congratulate the hon. Member for East Dunbartonshire (Jo Swinson) on securing this debate. I certainly hope that it made her happy. She discussed some issues of economic interest that, obviously, arose from ideas that occurred to her in her first economics lectures—I had similar ideas when I went to my first economics lectures—and some of the philosophical issues that underpin the assumptions that come together to give us our statistics.

Quality of life is obviously a wide issue, and many of the Treasury’s core functions improve people’s quality of life. As the hon. Lady said, increasing the wealth of individuals in the UK as a whole through gross domestic product is not the only determinant of quality of life, and I assure her that we do not hope and pray for natural disasters in order to see GDP levels rise. I suspect that we are as aware as she is of some of the perverse things that can happen if we apply the measurement of certain statistics with no sense about how we interpret them. It is always important to apply the common-sense test, let alone the happiness test, to the way that economics defines statistics and measures things.

Clearly, GDP does have a role. As we see in many countries without economic development, other factors which determine quality of life—schooling, health, cultural activities, security through policing and the rule of law, for example—are difficult to introduce, let alone safeguard and improve. GDP is a necessary but not sufficient condition for the higher levels of happiness that the hon. Lady aspires to for us all.

GDP is a measure of economic activity. It is generally accepted that it is not a perfect measure of wider welfare. To that extent, I certainly agree with the hon. Lady’s analysis. There is a wide body of work in the economics and statistical literature on alternative methods of measuring welfare. Such research has a long history, with early work in the area by Weisman and Stiglitz and, more recently, as she mentioned, by Richard Layard, who has been investigating the economics of happiness. That approach to assessing welfare combines economics with techniques more commonly used by psychologists.

Such research highlights factors other than income which affect well-being. The hon. Lady raised one in particular: the welfare effects of inequality. I well remember learning about bliss points when I was studying welfare economics. She may remember them, too. Obviously, finding society’s bliss point is what all Governments wish to do.

The research is interesting, and it provides useful insights. The economics of happiness literature does not purport to replace income-based measures of welfare, but instead complements them with broader measures
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of well-being. Other work by Metz, Riley and Weale at the National Institute of Economic and Social Research shows that between 1997 and 2002 the real GDP of both France and the UK grew at 2.7 per cent. per annum. However, real income, which they argue is a better measure of welfare, as it relates more directly to resources available for current and future consumption, grew at 3.2 per cent. per annum in the UK compared with just 2.5 per cent. in France. The Government continue to monitor developments in this area and to look at different ways of measuring even familiar concepts.

Another limitation of GDP as a welfare measure is that it includes paid work but not the unpaid work that we do—I say this as an avowed feminist—and an entire body of feminist literature, which I am always interested in keeping in touch with, demonstrates that. Cooking, cleaning, do-it-yourself, caring for dependants—none of that is measured.

Measuring and valuing unpaid output produced by households in the UK is an important body of research. In 2002, the Office for National Statistics published an experimental household satellite account which measured non-market production by households using the third-party criterion first developed by Margaret Reid in the 1930s; that is, that if someone else could be paid to provide the service, it should be measured. Its experimental estimate for 2000 showed that including such activity would almost double GDP. Clearly, that is an area in which I am extremely interested.

It is also important to note that the standard measure of GDP does not measure degradation of the environment or depreciation of natural resources. The hon. Lady touched on those issues in her wide-ranging remarks. Because it does not measure those things, we as policy makers and people who live on this planet increasingly have to take account of them. The ONS does, however, produce a set of UK environmental accounts that provide information about the environmental impact of economic activity, in particular about the emissions of pollutants, and about the importance of natural resources to the economy.

The hon. Lady is right to emphasise the narrowness of GDP. It is an important measure, but it is by no means the only one. However, using GDP as a measure of economic activity does have three advantages: it is a well-developed measure, it is easily understood, and it is compiled using a set of internationally agreed definitions.

Before I go into any more detail, I want to deal with a couple of points that the hon. Lady raised, particularly whether we should create an index of happiness. Such an index would be useful for policy making, and Her Majesty’s Treasury does follow research developments in this area, particularly the work of Richard Layard. However, GDP is still important and it is a better developed measure, but that does not mean that we rule out for all time the development of more sophisticated measurements.

The hon. Lady might want to engage with the now independent ONS, which would have to develop methodologies and have contacts internationally to be able to see whether work could be pushed forward on developing the wider measures of well-being and quality of life that she seeks.

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Jo Swinson: I am enjoying the Minister’s comments and I welcome much of what she has said, but I would like to push her slightly further. She said that GDP is a better developed method of measurement, which is obvious, but rather than waiting for more sophisticated measures of happiness and well-being to appear suddenly on the scale, will the Treasury take a proactive role in helping to develop them, including internationally?

Angela Eagle: We are interested in a more sophisticated understanding of the effects of economic and other human activity. Including the 50 per cent. of people whose work is often not counted—the unpaid area of the economy is a case in point—sustainability, the pricing and use of finite resources, and other externalities such as pollution when we measure and account for what we do, is clearly important as we enter an era in which we must re-engineer our economies to ensure sustainable economic activity that does not do more damage than good to the planet. To understand, for example, how carbon footprints are affected by activity, we must measure the whole-life carbon costs of those activities.

The science and this area of economics is in need of rapid development, if I may put it that way. In the past, it has not been mainstream; in fact, it has been defined out of the mainstream, as have unpaid work, happiness and welfare economics. The hon. Lady is right to say that all the way through the development of classical economic theory, other strands of study have been pursued by welfare economists. For example, as she said, Nicolas Sarkozy has contacted the Nobel prize-winning economist Amartya Sen, who has done some extremely important work in that field, and I can assure the hon. Lady that the Treasury is well aware of such theoretical developments.

Clearly, we need to see what we can do to ensure that the insights given to us by different ways of measuring and interpreting human activity are incorporated into what we do. Does that mean that we will abandon the measurement of GDP? Of course not. Does it mean that we need quickly to develop internationally agreed methods of measuring the carbon costs of activity? Yes. Does it mean that we could begin to consider whether we can develop the capacity both nationally and internationally to produce what the hon. Lady referred to as a happiness index or some form of quality-of-life measurement that takes on board a wider range of considerations than narrow GDP? Yes. Are we close to developing such an index this instant? No, we are not, and nor are we in a position from which to go forth confidently into international statistical conferences and hope for agreement on such measurement.

It is important, especially when measuring the national account, to use definitions that are agreed internationally, which makes them useful for cross-country comparisons. There are many strands to the work that the hon. Lady described in this fascinating but all-too-brief debate. I do not want to slam the door in any way on the ideas that she has introduced, but a great deal of work needs to be done, nationally and internationally, to get agreement on standards before we can hope to proceed.

I thank the hon. Lady for pursuing these issues, which are important in widening our general understanding of how human economic activity impacts on the societies to which it relates and beyond, to the sustainability of the planet, fairness between genders and fairness between
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countries. I aspire, like her, to see in the 21st century the narrower view of economics succeeded by a more holistic view that enables us to go forward with analytical tools and measurements, so that we can more appropriately assess the effects of our society’s activity. That way, we could make policy decisions in a more sophisticated way than the current narrow economic measurements enable us to do.

The hon. Lady should not throw the baby out with the bath water. I am sure that she recognises that GDP
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and some of the pure economic ways of measuring things have their place in our society. After all, even neo-classical economics developed the concept of neo-classical endogenous growth theory, which is a clever way of saying that if people are happy at work, they tend to be more productive.

Question put and agreed to.

Adjourned accordingly at five minutes to Five o’clock.

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