{"id":90971,"date":"2026-03-17T07:02:27","date_gmt":"2026-03-17T07:02:27","guid":{"rendered":"https:\/\/www.taxresearch.org.uk\/Blog\/?p=90971"},"modified":"2026-03-17T07:03:34","modified_gmt":"2026-03-17T07:03:34","slug":"10-of-gdp-is-fiction","status":"publish","type":"post","link":"https:\/\/www.taxresearch.org.uk\/Blog\/2026\/03\/17\/10-of-gdp-is-fiction\/","title":{"rendered":"10% of GDP is fiction"},"content":{"rendered":"<p class=\"p4\">Everyone is told that economic growth is the key to prosperity.<\/p>\n<p class=\"p4\">But what if a significant part of GDP, the number politicians obsess about, is based on a transaction that never actually happens?<\/p>\n<p class=\"p4\">Around <span class=\"s2\">10% of UK GDP is made up of something called \u201cimputed rent.\u201d<\/span> This is the imaginary rent homeowners are assumed to pay themselves for living in their own homes.<\/p>\n<p class=\"p4\">No money changes hands.<\/p>\n<p class=\"p4\">No market transaction takes place.<\/p>\n<p class=\"p4\">But the figure still appears in national income statistics.<\/p>\n<p class=\"p4\">In this video, I explain:<\/p>\n<ul>\n<li class=\"p4\">why imputed rent exists in national accounts<\/li>\n<li class=\"p3\"><span class=\"s3\">why around <\/span>\u00a3275 billion of UK GDP is based on this assumption<b><\/b><\/li>\n<li class=\"p4\">why GDP ignores huge amounts of real value creation such as childcare, care work and volunteering, and<\/li>\n<li class=\"p4\">why building economic policy around GDP growth is deeply misleading.<\/li>\n<\/ul>\n<p class=\"p4\">If GDP counts invented transactions but ignores real work that keeps society functioning, we need to ask a serious question:<\/p>\n<p class=\"p3\">Why do we treat GDP growth as the ultimate measure of economic success?<\/p>\n<p><iframe loading=\"lazy\" title=\"YouTube video player\" src=\"https:\/\/www.youtube.com\/embed\/GUuE2mY0-Tw?si=jfEJj3_THq3H-oRd\" width=\"560\" height=\"315\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<p>This is the audio version:<\/p>\n<p><iframe loading=\"lazy\" style=\"border: none; min-width: min(100%, 430px); height: 150px;\" title=\"10% of GDP is fiction\" src=\"https:\/\/www.podbean.com\/player-v2\/?i=ms4x7-1a70e6e-pb&amp;from=pb6admin&amp;share=1&amp;download=1&amp;rtl=0&amp;fonts=Arial&amp;skin=f6f6f6&amp;font-color=auto&amp;logo_link=episode_page&amp;btn-skin=c73a3a\" width=\"100%\" height=\"150\" scrolling=\"no\" data-name=\"pb-iframe-player\"><\/iframe><\/p>\n<p>This is the transcript:<\/p>\n<hr \/>\n<p class=\"p1\">Everyone in politics keeps talking about GDP growth. We are told that if GDP, our gross domestic product, grows, everything will be better: wages, public services, living standards, the lot.<\/p>\n<p class=\"p1\">But there\u2019s a fact that almost nobody ever mentions, which is that about 10%, \u00a31 in every \u00a310 of UK GDP, is completely fictional. It is money that nobody pays, nobody receives, and the transactions it refers to never take place.<\/p>\n<p class=\"p1\">It\u2019s about imputed rent, the rent homeowners are assumed to pay themselves for living in their own homes. But here\u2019s the question. If one tenth of GDP is a totally invented number, why are we obsessing about growing it?<\/p>\n<p class=\"p1\">Let\u2019s be clear. This is not a conspiracy. The accountants who are preparing this data are doing exactly what national accounting rules tell them to do, but the result is still quite extraordinary. Politicians, commentators, and economists obsess about increasing GDP, yet a huge part of what they\u2019re measuring is not an economic transaction at all. It\u2019s simply an estimate of what homeowners might pay themselves if they had to rent their own homes, but they don\u2019t. All of that raises an uncomfortable question. If a large part of GDP is constructed like this, how reliable is the rest of it, and why are we fixated with it?<\/p>\n<p class=\"p1\">Let\u2019s look at the data.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-large wp-image-90972\" src=\"https:\/\/www.taxresearch.org.uk\/Blog\/wp-content\/uploads\/2026\/03\/Table-16326-550x309.png\" alt=\"\" width=\"550\" height=\"309\" srcset=\"https:\/\/www.taxresearch.org.uk\/Blog\/wp-content\/uploads\/2026\/03\/Table-16326-550x309.png 550w, https:\/\/www.taxresearch.org.uk\/Blog\/wp-content\/uploads\/2026\/03\/Table-16326-533x300.png 533w, https:\/\/www.taxresearch.org.uk\/Blog\/wp-content\/uploads\/2026\/03\/Table-16326-768x432.png 768w, https:\/\/www.taxresearch.org.uk\/Blog\/wp-content\/uploads\/2026\/03\/Table-16326-1536x864.png 1536w, https:\/\/www.taxresearch.org.uk\/Blog\/wp-content\/uploads\/2026\/03\/Table-16326-600x338.png 600w, https:\/\/www.taxresearch.org.uk\/Blog\/wp-content\/uploads\/2026\/03\/Table-16326.png 1920w\" sizes=\"auto, (max-width: 550px) 100vw, 550px\" \/><\/p>\n<p class=\"p1\">In 2024, \u00a3275 billion of imputed rent was included in our national GDP. Now that GDP, our gross domestic product or national income, was \u00a32.7 trillion in the year, that\u2019s \u00a32,700 billion, and so almost exactly 10% of our GDP was made up of this fantasy number. It\u2019s much the same in earlier years. There\u2019s data on the screen for 2020 to 2023, and what you\u2019ll see is a mysterious fact that the figure for imputed rent goes up by exactly \u00a315 billion each year, which is very odd, and that the percentage figure is always around this 10% number; it varies between 9.6% and 10%.<\/p>\n<p class=\"p1\">What we\u2019re seeing is that there is this massive amount of rent, which is not paid, included in GDP.<\/p>\n<p class=\"p1\">Now, let\u2019s be clear. Rent paid by tenants is included in GDP, and homeowners do not pay rent; they don\u2019t need to. But the people who prepare the national accounts want to include a figure for what the rent would\u2019ve been if they had paid. The assumption then is that the homeowners pay rent to themselves. This is done so we do not distort GDP, depending upon the ratio of people renting and buying their own homes. But that ratio has not changed dramatically over the years, and it is not important to the economy.<\/p>\n<p class=\"p1\">Just to understand it like this. That \u00a3275 billion of supposed national income in 2024 did not represent any money being paid. There were no market transactions. That figure only exists because a national accounting rule says it should, and this imaginary transaction is then counted as part of that economic output.<\/p>\n<p class=\"p1\">Now, if that\u2019s the case, what would happen if we didn\u2019t count this number? Let\u2019s be clear about that as well. If we didn\u2019t include that 10% of imputed rent in our GDP, nothing would change in the real economy. Not a single job would be lost. No income would be. No production would be lost. The economy would be exactly the same, only the data would change.<\/p>\n<p class=\"p1\">And there\u2019s another important question that follows on from that, and that is that if we can invent some transactions for data reasons, why shouldn\u2019t we add some other figures into GDP as well? Why don\u2019t we inflate the figure to reflect other transactions, which don\u2019t involve money, but which do take place?<\/p>\n<p class=\"p1\">What about including the value of unpaid childcare, the value of charity and voluntary work, the value of looking after elderly relatives at home, or even the value of doing your own housework instead of paying someone to do it? All of these clearly create real value in the economy, but they\u2019re not included in GDP.<\/p>\n<p class=\"p1\">That reveals something important. GDP does not measure the value created in our society. In this way, it\u2019s totally misleading. All it does is measure transactions recorded in markets. If money changes hands, GDP counts it, well, except for imputed rents, where it makes a figure up. Everywhere else, anything that is not paid for simply doesn\u2019t count, and that\u2019s not good enough because those things have real value.<\/p>\n<p class=\"p1\">The logic becomes really rather surreal around this. If you care for your own children, clean your own home, look after your own elderly parents, or volunteer in your community, according to GDP, you\u2019ve done nothing of worth. On the other hand, if you live in your own home, apparently, you have created worth. How bizarre is that?<\/p>\n<p class=\"p1\">This tells us something important about what GDP really measures. It\u2019s claimed that GDP is a measure of prosperity and economic success, and national progress, but in reality, GDP is just a constructed accounting framework that is based on rules and conventions and which is entirely focused on market transactions.<\/p>\n<p class=\"p1\">The whole point of GDP is to encourage us, in effect, to outsource everything. Outsource your childcare, and GDP goes up; do it yourself, and it doesn\u2019t. Outsource caring for your parents, and GDP goes up; do it yourself, and it doesn\u2019t. All of this is absurd because it doesn\u2019t tell us about real well-being or where real value is being created yet, governments obsess about GDP growth. They obsess about quarterly GDP numbers. They obsess about league tables of GDP performance. But if GDP includes large estimates, invented transactions, and excludes huge amounts of real value creation, then chasing GDP growth is a very strange policy goal.<\/p>\n<p class=\"p1\">This matters because GDP shapes policy. Governments justify their decisions based upon increasing GDP and protecting growth. But if GDP is a partial and deeply distorted measure of economic activity, then policy built around it will also be distorted, and we will get very strange economic outcomes. In fact, we are.<\/p>\n<p class=\"p1\">Three conclusions follow from that. First, GDP is not a straightforward measure of economic output.<\/p>\n<p class=\"p1\">Second, a significant part of GDP is based on accounting assumptions and not real transactions.<\/p>\n<p class=\"p1\">Third, GDP ignores many of the activities that actually make our society function.<\/p>\n<p class=\"p1\">So, treating GDP growth as the ultimate economic goal makes very little sense when GDP counts the rents we don\u2019t pay, but ignores the actual work that we do that keeps society alive.<\/p>\n<p class=\"p1\">Instead of obsessing about GDP, we should be asking something more important. Things like how secure are people\u2019s lives, and how good are our public services? Plus, do people live in decent housing, and are we protecting the environment, or are we reducing inequality? Those are real economic goals with real economic outcomes that would change the well-being of people. They matter far more than the growth of this accounting construct called GDP.<\/p>\n<p class=\"p1\">So here\u2019s the question I want to leave you with. If GDP includes inverted transactions like imputed rent, but excludes huge amounts of real value creation in society, why do we treat GDP growth as the ultimate measure of success? And if GDP is the wrong target, what should replace it?<\/p>\n<p class=\"p1\">Let me know your thoughts in the comments below. And if you found this video useful, please like it, subscribe, and share it, because understanding how the economy is measured is the first step to changing how it works.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Everyone is told that economic growth is the key to prosperity. But what if a significant part of GDP, the number politicians obsess about, is<br \/><a class=\"moretag\" href=\"https:\/\/www.taxresearch.org.uk\/Blog\/2026\/03\/17\/10-of-gdp-is-fiction\/\"><em> Read the full article&#8230;<\/em><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[35,224,106,235,223],"tags":[],"class_list":["post-90971","post","type-post","status-publish","format-standard","hentry","category-economics","category-neoliberalism","category-politics","category-politics-for-people","category-politics-of-care"],"_links":{"self":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts\/90971","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/comments?post=90971"}],"version-history":[{"count":3,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts\/90971\/revisions"}],"predecessor-version":[{"id":90983,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts\/90971\/revisions\/90983"}],"wp:attachment":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/media?parent=90971"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/categories?post=90971"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/tags?post=90971"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}