An interesting idea. For we do indeed know that there're problems with using GDP as the sole guide to how the economy is doing. It doesn't measure distribution for example, counts cleaning up pollution as positive (which it is) but not the original pollution as negative and so on. It also suffers from a grave problem in the way that it measures government activity. It's this which Fox thinks we should address:
We have long been fixated on the concept of GDP growth as the determinant of economic wellbeing, particularly in the political arena. Yet, there is a difference between GDP and wealth creation and it is the latter that ultimately determines our national prosperity. We create wealth when we turn an individual’s idea into a good or a service for someone else to buy. Consider the Keynesian idea of burying £5 notes in bottles in mineshafts and having the private sector dig them up, or Krugman’s proposal to stage a fake alien invasion to boost anti-alien defence spending. Both would boost GDP, but neither would add to worthwhile economic activity. There are better ways to measure whether policies are conducive to wealth creation. If we take total government expenditure out of GDP calculations, then the resulting measure, Gross Private Product (GPP), gives us a much better idea of worthwhile economic activity.
We would most certainly agree that GPP is a useful figure for us to be looking at.
For there's more to it than just some ideas and plans of government not being very sensible, even if they do push the GDP numbers up. We have a basic problem about how to include government in GDP. Which is that we measure GDP at market prices: but there's no market prices for much of what government provides. Thus we have to fall back on simply arguing that the value of what government provides is the amount of money that government spends on that provision. Yes, even we think that a criminal justice system is a good thing to have, adds greatly to the general wealth. Government spending on diversity advisers possibly loss so.
One implication of this is that if we decide to pay civil servants more then the economy grows. Because we are counting the output of the civil servants as being the same as the input we pay them to provide it. So, we do indeed need to change how we view at least some parts of the GDP figures, and looking to GPP seems like a good idea to us.
Stripped, of course, of all that chest beating about it being only the Tories what done it.