HC Deb 24 April 1998 vol 310 cc699-700W
Mr. Mitchell

To ask the Chancellor of the Exchequer if he will express the Bank of England's inflation target in terms of the harmonised index of consumer prices. [39571]

Mrs. Liddell

The Government's inflation target of 2½ per cent. was confirmed in the March Budget. It is defined as the 12-month increase in the Retail Prices Index excluding mortgage interest payments (RPIX).

Mr. Mitchell

To ask the Chancellor of the Exchequer what guidance he has issued to the Monetary Policy Committee on the account it should take of trends in the harmonised index of consumer prices where they differ from the RPI trend. [39575]

Mrs. Liddell

The Chancellor's guidance to the Monetary Policy Committee is set out in his remit letter of 12 June 1997.

Mr. Mitchell

To ask the Chancellor of the Exchequer what research he has commissioned on the accuracy of the RPI as a measure of inflation. [39570]

Mrs. Liddell

The information requested falls within the responsibility of the Chief Executive of the Office for National Statistics. I have asked him to arrange for a reply to be given.

Letter from Tim Holt to Mr. Austin Mitchell, dated 24 April 1998: As Director of the Office for National Statistics (ONS), I have been asked to reply to your parliamentary question on the accuracy of the RPI as a measure of inflation. The ONS is currently engaged in research into a number of aspects of RPI accuracy. Some of it is described in an article in the October 1997 issue of Economic Trends, pages 56–62; a copy of which is available in the House of Commons Library. The ONS has also commissioned work from the University of Cardiff Business School, the Institute of Fiscal Studies, The University of Sheffield and Simon Fraser University, British Columbia.

Mr. Mitchell

To ask the Chancellor of the Exchequer what assessment he has made of the principal factors which underlie differences in trends of(a) the RPI and (b) the harmonised indices of consumer prices. [39566]

Mrs. Liddell

The information requested falls within the responsibility of the Chief Executive of the Office for National Statistics. I have asked him to arrange for a reply to be given.

Letter from Tim Holt to Mr. Austin Mitchell, dated 24 April 1998: As the Director of the Office for National Statistics (ONS), I have been asked to reply to your parliamentary question on the assessment of the principal factors which underline differences in trends between the retail prices index (RPI) and the harmonised index of consumer prices (HICP). A recent analysis of these trends was published in an article about the HICP in Economic Trends No. 531, February 1998, a copy of which is available in the House of Commons Library. The analysis showed that, during 1997, the trend in the HICP annual rate of inflation was broadly similar to that for RPI excluding mortgage interest payments (RPIX). During this period, the annual rate of inflation for the HICP was, on average, 0.9 percentage points lower than RPIX of which:

  1. i. the effect of using the geometric mean in the HICP for the calculation of elementary aggregates of prices at the most basic level, as opposed to arithmetic means in the RPIX, contributed 0.5 percentage points to the difference between the two inflation measures.
  2. ii. coverage differences, such as the exclusion of Council Tax, house depreciation and some health and education expenditure from the HICP, in addition to the inclusion of a series for personal computers in the HICP (excluded from the RPI prior to January 1998) contributed a further 0.4 percentage points to the difference between the two measures of inflation.