1. Introduction

This note explains the estimated impact of implementing measures announced in the March 2017 Budget, previous budgets and pre-budget reports on the Consumer Prices Index including owner occupiers’ housing costs (CPIH), CPI and the Retail Prices Index (RPI).

It does not include an estimate of the impact of the levy on soft drinks with added sugar content because these changes are not due to come into effect until April 2018.

The estimated contributions in this document assume all announced changes are passed on immediately and in full to consumers as soon as they come into effect. In practice, this is unlikely: for instance, changes to tobacco and alcohol duties generally affect the index over a period of several months as stocks deplete.

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2. Budget and Autumn Statement measures that will impact CPIH, CPI and RPI

Table 1 details the measures announced in the budget and Autumn Statement that will impact on the CPIH, CPI and RPI 1-month rates in the financial year ending 2018, along with the estimated magnitude of the effect. We have not included an estimate for the impact of the minimum exercise tax for cigarettes because the effect on the top level inflation figures is likely to be negligible.

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3. Impact of budget and Autumn Statement measures on the CPIH, CPI and RPI 1-month rate

Table 2 presents a comparison of the impact on the CPIH, CPI and RPI 1-month rates of the budget and Autumn Statement measures that were implemented in the financial year ending 2017 and those that have been or will be implemented in the financial year ending 2018.

The measures that will be implemented in the financial year ending 2017 are estimated to increase the CPIH 1-month rate by approximately 0.16 percentage points, the CPI 1-month rate by approximately 0.18 percentage points and the RPI 1-month rate by approximately 0.23 percentage points.

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4. Cumulative effects of the budget and Autumn Statement on the CPIH, CPI and RPI 12-month rate

The following tables show the cumulative effects on the all items CPIH, CPI and RPI 12-month rates of the budget and Autumn Statement measures that were implemented in financial year ending 2017 and those that have been or will be implemented in financial year ending 2018. They also show the likely timing of effects on the CPIH, CPI and RPI 12-month rates, assuming all announced changes are passed on immediately and in full to consumers as soon as they come into effect.

Effects on the CPIH 12-month rate

It is estimated that the budgetary measures implemented in financial year ending 2018 will add 0.16 percentage points to the CPIH 1-month rate. This means that the CPIH 12-month rate is estimated to increase by 0.12 percentage points because the impact of the measures implemented in financial year ending 2017 was 0.04 percentage points.

Effects on the CPI 12-month rate

It is estimated that the budgetary measures implemented in financial year ending 2018 will add 0.18 percentage points to the CPI 1-month rate. This means that the CPI 12-month rate is estimated to increase by 0.13 percentage points because the impact of the measures implemented in financial year ending 2017 was 0.05 percentage points.

Effects on the RPI 12-month rate

It is estimated that the budgetary measures implemented in financial year ending 2018 will add 0.23 percentage points to the RPI 1-month rate. This means that the RPI 12-month rate is estimated to increase by 0.17 percentage points because the impact of the measures implemented in financial year ending 2017 was 0.06 percentage points.

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5. Background notes

  1. CPIH extends the Consumer Prices Index (CPI) to include a measure of the costs associated with owning, maintaining and living in one’s own home, known as owner occupiers’ housing costs (OOH), along with Council Tax. Both of these are significant expenses for many households, and are not included in the CPI. CPIH is not currently a National Statistic. It has been reassessed by the Office for Statistics Regulation (OSR) against the standards set out in the Code of Practice for Official Statistics. The assessment report published on 3 March 2016 included a number of requirements that need to be implemented for CPIH to regain its status as a National Statistic and we are working to address these.

  2. The CPI is a measure of consumer price inflation produced to international standards and in line with European regulations. First published in 1997 as the Harmonised Index of Consumer Prices (HICP), the CPI is the inflation measure used in the government’s target for inflation. The CPI is also used for purposes such as uprating pensions, wages and benefits and can aid in the understanding of inflation on family budgets.

  3. The Retail Prices Index (RPI) is a legacy measure of UK inflation that continues to be used for purposes such as the indexation of pensions, rents and index-linked gilts.

  4. This note is prepared simply as a helpful guide to users of the CPIH, CPI and RPI. The Office for National Statistics accepts no liability whatsoever for losses of any kind arising as a result of reliance on this note.

  5. The effects of the budgets shown in this note are estimates only.

  6. Percentage point contributions to the CPI, CPIH and RPI 1-month change are based on average retail prices as measured in the February 2017 indices.

  7. No estimate has been made of any price changes resulting from other budget measures, direct or otherwise.

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Contact details for this Article

James Tucker
cpi@ons.gsi.gov.uk
Telephone: Consumer Price Inflation Enquiries: +44 (0)1633 456900 Consumer Price Inflation recorded message (available after 9.45am on release day): Telephone: + 44 (0)800 0113703