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UK could ditch CPI inflation measure

The UK could ditch the consumer prices index as its main measure of inflation in favour of an alternative which includes owner occupiers’ housing costs.

An independent review of UK consumer price statistics, carried out by Institute for Fiscal Studies director Paul Johnson, recommends shifting from CPI to CPIH as the primary measure of inflation.

It also says Government and regulators should abandon the use of the retail prices index measure “as soon as practicable”, citing “basic statistical flaws” in its construction.

In addition, Johnson suggests there is currently an “unhelpful proliferation” of indices designed to measure price in the UK.

He says: “In 2013, the UK Statistics Authority de-designated the RPI as a National Statistic and the Office for National Statistics introduced the new CPIH measure to include owner occupiers’ housing costs.

“In my view, it is time for the UK government to take the next, logical step and stop using RPI in any element of the tax, benefit and regulatory systems. 

“I would also like to invite the UKSA to consider how it might support better statistical measures of household inflation.

“Different population groups – the young and the old, families and individuals, home-owners and renters – have different spending patterns and hence face different rates of inflation. An annual publication showing how inflation measures differ between these groups would be most welcome.”

UK Statistics Authority chairman Sir Andrew Dilnot says: “The UK Statistics Authority is grateful to Paul Johnson for this landmark report on UK consumer prices statistics which should be seen as an authoritative and comprehensive review of a complex statistical landscape with a number of recommendations which the UKSA will want to consider further.

“I have asked the national statistician, John Pullinger, to consider the review and make recommendations to the board of the UK Statistics Authority.”

The UKSA expects to launch a formal public consultation in the summer of 2015 before making its final response later in 2015. 


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