Inflation Statistics

RPI Governance and the Consumer Prices Advisory Committee

The inflation figures are perhaps the most important of any economic data. Inflation is not only a key economic series but also a policy target for the Bank of England and used to uprate benefits and numerous contracts. Accordingly it has always - uniquely among data - been subjected to special control mechanisms, normally in the form of an advisory committee, to maintain public confidence in the numbers. a

The ONS Framework Document, 1996 states: ‘The scope and definition of the RPI are matters decided by the Chancellor of the Exchequer. The Director of the ONS takes the lead in advising on methodological questions concerning the RPI and services an RPI Advisory Committee (RPIAC) to which the Chancellor of the Exchequer will refer issues for consideration as appropriate.’

The Chancellor has been responsible for the scope and definition of the RPI since 1989, when the CSO, a forerunner of the ONS, took over responsibility for its production from the Department of Employment. Previously, the Secretary of State for Employment had responsibility. Major changes in the methodology and procedure of the RPI were always referred to an RPIAC. Such a committee was convened by the Chancellor whenever it was felt that there were major issues on which advice was needed, and the committee reported to him. Committee membership typically included experts on the matters being discussed and representatives of users of the RPI, including people from HM Treasury, Eurostat, the Confederation of British Industry, the Bank of England, charities, the National Consumer Council and the Trades Union Congress. An RPIAC made recommendations to the Chancellor, who was in principle free to accept or reject them. However, since their forerunners first began in 1904, no recommendation has ever been rejected. The reports of RPIACs were published, usually as Command Papers.

The last committee was convened in 1992, and it was a matter of some debate as to whether the committee should have met at some point during the following 15 years as there were several significant changes to the methodology. While many of the changes were sensible, they often had the effect of reducing the reported rate of inflation, thereby reducing the extent of cost increases to be met by the government.

The RPIAC was superseded by the Consumer Prices Advisory Committee as part of the Statistics and Registration Service Act 2007. That legislation requires the Statistics Authority to compile and maintain the RPI and publish it every month. It further requires that before making any change to the coverage or the basic calculation of the index, the Authority must consult the Bank of England as to whether the change constitutes a fundamental change in the index which would be materially detrimental to the interests of the holders of relevant index‐linked gilt edged securities. If the Bank of England considers that that change is a fundamental change in the index which would be materially detrimental to the holders of index‐linked gilts, the Authority may not make the change without the consent of the Chancellor of the Exchequer.

Any methodological changes to the RPI therefore require the approval of the Authority before being referred to the Bank of England. To facilitate this, the Authority established the Consumer Prices Advisory Committee to advise it on proposals for change to the RPI. It has three distinct roles:

1. To advise the UKSA on the implication for the RPI of the changes to the index recommended by the ONS.
2. To provide the UKSA with advice on RPI methodological issues.
3. To advise the UKSA on improvements to the UK CPI recommended by ONS.

CPAC currently publicises its work through its Annual Report to the UK Statistics Authority. There have, however, been requests for greater transparency of the work of the Committee. Accordingly, CPAC has decided to make summary minutes of its meetings publicly available in future.