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Inflation

Answer

The information requested falls within the responsibility of the National Statistician who has been asked to reply. Letter from the Director of Macroeconomics and Labour Market, Colin Mowl, dated 14 September 2006. The National Statistician has been asked to reply to your recent Parliamentary Question (HL7274) which asked what would have been the increase in the retail prices index and consumer prices index over the past one, three and five years using equal weights for the expenditure of each household (democratic weights) instead of weights proportional to the expenditure of each household (plutocratic weights). I am replying in her absence. Information in the form requested is not readily available. Calculation of democratic weights for the retail prices index (RPI) would involve a considerable degree of manipulation of data from the Office for National Statistics' (ONS) expenditure and food survey, from which the RPI weights are derived. Specifically, the process would involve returning to the original survey data at household level (that is, each individual response). For each household, actual spending on every commodity would need to be converted into a proportion of the total expenditure incurred by that particular household. These proportions would need to be averaged across all households before using the resultant averages to produce RPI expenditure weights on a democratic basis. Special calculations would also be required to derive the weights for certain housing components whose weights are modelled (that is, mortgage interest payments and depreciation costs). This means that the question can be answered only at disproportionate cost. However, previously unpublished research by ONS, which is summarised in the table below, gives some indication of the difference between the use of democratic and plutocratic weights in the RPI:

RPI percentage change over 12 months
	Feb 1999	Feb 2000	Feb 2001
Democratic weights	2.5	2.5	2.7
Plutocratic weights (actual RPI)	2.1	2.3	2.7

Consumer prices index (CPI) weights are derived from whole economy estimates of household expenditure taken from the national accounts. The source data come from a variety of sources, including non-household surveys, and are therefore not amenable to the construction of democratic weights.

Secondary information

Type

Written question

Reference

7274; 685 c55-6WA

Session

2005-06

Subjects

Expenditure Households Inflation Statistics Retail prices index Consumer prices index

Contains statistics

Yes

Link

View this Written question on www.publications.parliament.uk