Mr. Alan Lee Williamsasked the Minister of Labour what study he has made of the article on the retail price index published in the Consumer Council's magazine, "Focus", a copy of which has been sent to him; and whether he will make a statement on his conclusions.
§ Mr. GunterI welcome the interest shown by the Consumer Council in the index and the methods used to compile it. The index is compiled in accordance with the advice of my Cost of Living Advisory Committee. The weighting pattern of the index is brought up to date each January and is based on the expenditure records of nearly 10,000 households which co-operated in the Family Expenditure Survey in the three years ended in the previous June. Each month more than 100,000 price quotations are collected in 200 areas in respect of nearly 350 items. I am satisfied that the index derived from these price quotations provides a reliable index of changes in the prices paid by households of wage earners and small and medium salary earners for the goods and services they purchase.
The article referred to contains some criticisms on which I would like to take the opportunity of commenting.
Some of the criticisms appear to be based on a misunderstanding of the purpose of the index. This is to measure changes in the level of retail prices of 183W goods and services. Hence it does not include, for example, Income Tax. And while mortgage payments are omitted, owner-occupiers are treated as if they paid an equivalent rent.
There appears also to be a misconception that if a commodity is not included among the list of items (or price indicators) for which prices are collected, then it is not in the index. The expenditure on such a commodity is included in the weighting pattern and provision made for movements in its price on the basis that these follow one or more of the price indicators for similar commodities.
The items for which quotations are obtained and the methods of collecting prices are kept continuously under review and changes are made when necessary. For example, when resale price maintenance was ended on sweets and chocolates and wines and spirits, the central collection of prices from manufacturers and importers was discontinued and local collection from retailers was started. No immediate changes in the methods of price collection or index construction are contemplated other than the inclusion among the price indicators of meals bought and consumed outside the home.
As regards the possibility of producing separate indices for regions and special social and income groups, I expect to receive shortly a report by my Cost of Living Advisory Committee which is examining this problem. I am also inviting the Committee to let me have any comments they may wish to make generally on the article in question.