Use CPIH to measure inflation – and discard RPI altogether, says Johnson report

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A report investigating the effectiveness of the various price indices now produced by the Office for National Statistics (ONS) has recommended that the CPIH (the Consumer Prices Index which also takes account of housing costs) be made the main measure of the UK’s inflation.

The independent review was commissioned back in May 2013 as part of an ongoing exercise by the UK Statistics Authority to ensure that UK consumer price statistics are fit for purpose. It follows increasing concern in recent years over the discrepancy between the Retail Price Index (RPI) and Consumer Price Index (CPI) and their respective adequacy to measure inflation in the UK.

Led by the director of the Institute for Fiscal Studies Paul Johnson, the review confirms ongoing misgivings about the RPI (which led to it being stripped of its status of National Statistic in 2013), concluding that it is ‘a flawed statistical measure of inflation’. It recommends ending any practical uses of the RPI as soon as possible, along with the RPIJ, which was created as a possible alternative to the RPI.

The review hails the CPI as a better measure of inflation, but since the CPI does not include owner occupiers’ housing costs, says there is a strong case for moving towards the CPIH as the main measure (subject to ironing out issues around legislation and methodology).

In a statement, UKSA chair Andrew Dilnot called the review ‘authoritative and comprehensive’. It will now be considered by National Statistician John Pullinger, who will then make recommendations to the Authority’s board. A full public consultation will be launched in the summer with a final response expected later in the year.

Mike Hughes, who chairs the RSS National Statistics Advisory Group , said: ‘The RSS welcomes the comprehensive nature of the review and the welter of research that has been undertaken. Nevertheless, it shares the concerns expressed by the RPI CPI User Group about a missed opportunity to propose an uprating index. The RSS will be considering the report in detail and will comment more fully shortly.’

Office for National Statistics (ONS) Andrew Dilnot Inflation National Statistics Advisory Group (NSAG)

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