£2 trillion poorer than previously thought? Assessing changes to household wealth statistics

The total wealth of Britain's households in 2018 to 2020 was approximately £2.2 trillion less than was previously believed - a 14% reduction. That, at least, is the implication of a recent change in methodology made by the Office for National Statistics (ONS) to the UK's leading official measure of household wealth. The revision makes three changes to previous methodology for valuing households' pension wealth. Two are clear improvements. But the third change - by far the biggest, by itself subtracting a staggering £2.3 trillion from recorded wealth - is a mistake, stemming from faulty economic reasoning. It is quite possible that the ONS's revised estimates of household wealth are actually further from the truth than the estimates it started with (themselves undoubtedly flawed). The result is that policymakers lack a reliable set of household wealth statistics on which to base policy.