The Office for National Statistics (ONS) has concluded its classification review of the Energy Price Guarantee (EPG) for domestic consumers, and the Energy Bill Relief Scheme (EBRS) for non-domestic consumers, in the context of international statistical guidance. The payments under these schemes will be classified as subsidies on products, paid by central government to the energy suppliers in the non-financial corporations sector in the UK.
The implication for consumer price inflation of the classification decision is that the EPG, as a subsidy on products paid by central government to energy suppliers, influences the prices that domestic consumers are charged for a unit of gas or electricity. It is these reduced unit prices that will be used in compiling the Consumer Prices Index including owner occupiers’ housing costs (CPIH), Consumer Prices Index (CPI) and Retail Prices Index (RPI), which will hence be lower while the schemes are in operation than if the EPG had not been introduced.
Similarly, the implication for producer price inflation of the classification decision is that, as a subsidy on products paid by central government to energy suppliers, the EBRS influences the prices that non-domestic consumers are charged for a unit of gas or electricity. It is these reduced unit prices that will be used in compiling the input Producer Price Index (PPI), which measures the cost of raw materials used in production, and which will hence be lower than if the EBRS had not been introduced.
Under the EPG and the EBRS, the government specifies either a limit on the amount that consumers can be charged for a unit of gas or electricity, or a price reduction to be applied per unit of gas and electricity consumed. The government fully compensates energy suppliers for the savings delivered to domestic and non-domestic consumers. These payments will apply for six months beginning on 1 October 2022.
Decisions on whether to include rebates, subsidies and discounts in our consumer prices inflation statistics are taken on a case-by-case basis, aiming to be consistent with the UK National Accounts, the public sector finances, and other economic statistics. They are based on international statistical guidance and practical considerations. More information on this is provided in Section 9.2 of our Consumer Price Indices Technical Manual.
If you require any further information on these classification assessments, please email econstats.classifications@ons.gov.uk, or on its implications for inflation statistics cpi@ons.gov.uk or business.prices@ons.gov.uk for CPI and PPI queries respectively.