The Household Costs Indices (HCIs) are a priority for improving consumer prices. They aim to reflect changing prices and costs as experienced by different household groups and provide a complement to our other measures of consumer price inflation.

Their development has not been straightforward. For a number of years my Advisory Panels for Consumer Prices (APCPs) have been debating the HCIs framework and what types of household spending should be included. This culminated in the recent Economic Statistics Centre of Excellence workshop on the conceptual foundations of the HCIs in April 2019.

A large part of the discussion has focused on the appropriateness of including the capital element of mortgage repayments. These are typically excluded from consumer price inflation measures because they represent the purchase of assets. On the other hand, mortgage payments are a key expense for many households, and one from which they cannot easily escape.

Having listened to the views of a wide range of users and experts it is clear that there is a need for a measure that incorporates the capital element of owner-occupied housing. I have therefore decided that the Office for National Statistics (ONS) will develop a measure of capital mortgage repayments. The ONS will develop this in a variant measure, the HCIC (HCI – Capital), after work on the main HCIs has been completed. This will allow users with varying needs to select the best measure for their purposes.

The challenges around developing a capital mortgage repayments index are complex and will take some time to resolve. I have balanced this against the need to have a reliable index more quickly. The ONS currently produces annual, experimental HCIs estimates. We will now focus on refining the core HCIs measure before producing a quarterly statistical bulletin and seeking National Statistic status for them. Once this has been achieved we will then look to develop the HCIC variant, as well as considering other versions of HCIs that may be of use to users. The ONS will publish its development plans and a timeline for the path to regular production in due course.

In progressing all of the above, the ONS will continue to work closely with users and the Advisory Panels on Consumer Prices.

John Pullinger
National Statistician