Drugs and prostitution will give the economy a £10 billion boost following a radical overhaul of how GDP is calculated.
The Office for National Statistics (ONS) said the changes to the national accounts would have increased GDP by 4-5% based in 2009, the only year it sampled.
The ONS is adding more illegal activities to its calculations to try and capture all forms of economic activity. It currently includes alcohol and tobacco smuggling but will take comparable figures from EU countries where drug use and prostitution are legal to form the basis of its estimates. The Office said illegal drugs would add £5.3 billion to GDP in 2009 with prostitution adding £4.4 billion.
It is also changing the way it measures charities, which would have added £24 billion or 1.7% of GDP in 2009. People who build their own house would have added a further £4 billion, with a rehash of how bank interest is calculated adding £5 billion.
However, changes to the calculation of business investment will reduce GDP by £5 billion and ‘stock building by UK companies’, another £5 billion.
ONS Chief Economic Adviser Joe Grice said: ‘As economies develop and evolve, so do the statistics we use to measure them. These improvements are going on across the world and we are working with our partners in Europe and the wider world on the same agenda.
‘Here in the UK these reforms will help ONS to continue delivering the best possible economic statistics to inform key decisions in government and business.’
The calculations on the use of illegal drugs and prostitution make a lot of assumptions, however, due to the lack of data available, and it admits that in places they are ‘weak’.
It has to make projections of the number of prostitutes, how many clients they see and what they charge.
Its estimate for the number of prostitutes in the UK is based on a 2004 Metropolitan Police guess that there are 115 prostitutes on the street at any one time in London and 7,000 offstreet. These were scaled up by the UK population, which gave around 58,000 in the whole country.
The price they charge was based on research by a website called punternet, while the number of clients they see per week was estimated at between 20 and 30, based on data from the Netherlands. Similarly Dutch figures led the ONS to make assumptions that prostitutes spend €125 per year on clothes and €0.5 per client on condoms.