§ Mr. Tim SmithTo ask the Chancellor of the Exchequer on what grounds it was decided(a) to exclude the cost of credit and (b) to include mortgage interest in the retail prices index.
§ Mr. Lilley[holding answer 26 March 1990]: The cost of credit has never been included in the RPI, following successive recommendations of the retail prices index advisory committee which were reaffirmed in a report submitted by the committee in 1986 (published as Cmnd. 9848).
The inclusion of mortgage interest payments in the RPI follows recommendations in a report submitted by the advisory committee in 1974 (published as Cmnd. 5905). The committee examined this question again in 1986 and confirmed that mortgage interest payments shou1d continue to be included as a proxy for owner-occupiers' housing costs.
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§ Mr. Tim SmithTo ask the Chancellor of the Exchequer on what grounds it was decided(a) to exclude financial services and (b) to include property insurance in the retail prices index.
§ Mr. Lilley[holding answer 26 March 1990]: Both financial services and property insurance are covered by the retail prices index. The treatment of the former raises certain conceptual and practical problems which are currently being considered by the retail prices index advisory committee and any recommendations which the committee makes will be laid before Parliament in due course.
§ Mr. Tim SmithTo ask the Chancellor of the Exchequer on what grounds it was decided(a) to include the community charge and (b) to exclude income tax from the retail prices index.
§ Mr. Lilley[holding answer 26 March 1990]: The inclusion of the community charge follows recommendations made by the retail prices index advisory committee in a report submitted last year, which also accepted that income tax should continue to be excluded. I refer the hon. Member to that report (published as Cm. 644) which sets out the arguments very fully.
§ Mr. Tim SmithTo ask the Chancellor of the Exchequer on what grounds it was decided to exclude holiday expenditure from the retail prices index.
§ Mr. Lilley[holding answer 26 March 1990]: Holiday expenditure has never been covered by the retail prices index because of difficulties in measuring price changes satisfactorily. The RPI advisory committee recommended in a report submitted in 1986 (published as Cmnd 9848) that it should be brought into the index but recognised that, before this could be done, further work would be needed to resolve some conceptual and technical problems. The Central Statistical Office is about to report back to the committee on the progress of this work and the committee's conclusions will be laid before Parliament in due course.
§ Mr. Tim SmithTo ask the Chancellor of the Exchequer on what grounds it was decided to exclude the price of houses from the retail prices index.
§ Mr. Lilley[holding answer 26 March 1990]: House prices do figure in the retail prices index indirectly in that they affect the size of the morgage debt and thus the level of mortgage interest payments. In a report submitted in 1986 the RPI advisory committee considered the possibility of incorporating house prices into the index in their own right but this suggestion was rejected by the committee. I refer the hon. Member to paragraph 114 of the report (published as Cmnd 9848), which sets out the arguments very fully.
§ Mr. Tim SmithTo ask the Chancellor of the Exchequer what progress has been made, since the National Audit Office examination of the retail price index, with production of a technical manual incorporating detailed operational objectives for the index and with developing ways of establishing a suitable measure or measures of the statistical reliability of the index and of prioritising potential improvements to the retail prices index system.
§ Mr. Lilley[holding answer 26 March 1990]: Progress made on these matters since the National Audit Office's 112W examination will be reported by the departmental accounting officers concerned to the Public Accounts Committee on 28 March and I would not wish to anticipate that hearing.