History of Statistics / Official Statistics section meeting: The history of inflation measurement in the UK

This meeting took place on 13 December 2018 at the RSS. It was co-organised between the History of Statistics Section and the Official Statistics Section. Jeff Ralph (Southampton University), Paul Smith (Southampton University) and Robert O’Neill (Huddersfield University) presented their recently released book Inflation: History and Measurement.

Jeff Ralph outlined the early history of measuring changes in the cost of living, starting with Fleetwood in 1707. A cost of living series was started in 1914. During the inter-war years, civil servants were paid on a sliding scale according to the index. During WWII, prices were subsidised to justify keeping wage rises down. The index was still based on weights from the 1904 household survey until an interim index was used in 1947-1956.

Paul Smith covered the period 1956-1995. The Retail Price Index (RPI) was introduced in 1956 and the Family Expenditure Survey in 1967. There was a long-running debate over owner-occupiers’ housing costs. The RPIX was used for a time; it excluded mortgage interest in order not to create a feedback loop when interest rates were raised. Inflation targeting by the Bank of England was introduced after 1992. 

Robert O’Neill reported on more recent developments. The Consumer Prices Index (CPI) was introduced in 1996. As time went on it was accepted as the main measure of inflation, now used for uprating pensions, benefits etc. although meant for macroeconomic purposes. Many payments made by the public are linked to the RPI which is usually higher, and this is controversial. The CPI excludes mortgage interest while the RPI excludes people at the extremes of the distribution of incomes and includes money spent abroad. In 2012, the RPI lost National Statistic status, but is still calculated for historical continuity and legal needs. The preferred ONS measure is CPIH which includes owner-occupiers’ housing costs.

A discussion followed, led by RSS fellows John Astin, Michael Baxter and Cecilia Lanata Briones. The points raised included the fact that the media take reported statistics as incontestable evidence, ignoring the context. There has always been some political and Treasury interference in measurement processes, and currently there is a House of Lords inquiry into RPI/CPI. Producing a price index is expensive; the speakers disagreed over doing this by web-scraping epos information from supermarkets. Internationally, there is often a dichotomy between private and official indices, and sometimes great distrust of the latter.


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