asked Her Majesty’s Government:
Whether they will review the content and weighting of the consumer prices index.
My Lords, the production of the CPI is the responsibility of the Office for National Statistics, the executive office of the independent UK Statistics Authority. The items in the CPI basket of goods and services, and the weights used to combine these items into a single index, are reviewed every year. They were last updated on 18 March 2008. The next review is due in March 2009.
My Lords, will the noble Lord take a look at the Government’s own Family Expenditure Survey, which shows clearly that lower-income families all the way up to middle-income families spend a much larger proportion of their expenditure on items that have been either downgraded or excluded altogether from the CPI? If somebody tells them that inflation is running at 2.5 per cent when they know that it is about 7 per cent, they think that a cruel joke is being played on them, especially as their pensions and benefits are linked to this and are nowhere near adequate or honest.
No, my Lords. Their pensions and benefits are linked to the RPI, which is at 3.9 per cent—60 per cent higher than the CPI. However, the noble Baroness is right that some household budgets, certainly among the poorest, are suffering against a background of rising energy and food prices, which we all recognise present real problems. That is why the Government have taken action to delay the rise in fuel duty and are approaching energy retailers to make sure that they tackle fuel poverty issues. We also address the winter fuel allowance each year in these terms. Of course, we are concerned about the shocks that occur to the system from time to time, but inflation is not only historically low in the United Kingdom, but lower than elsewhere.
My Lords, it is irresponsible for anybody, certainly someone from the Official Opposition, to suggest that the Office for National Statistics is not doing its professional job in a professional way. The facts are that at the moment the RPI and the CPI are rising at approximately 2.5 per cent per annum. Independent forecasters—I emphasise “independent”—predict that the rate of increase of each of those will fall next year, which suggests that inflation policy is well under control. You can always construct people or a family who buy different things. That is something of which the ONS is aware, but it is not its job. Its job is to calculate these indices professionally and objectively.
My Lords, my noble friend is right that the CPI is the internationally recognised inflation rate. The Office for National Statistics is an independent body; this House passed the Bill last year to increase the independence of the Office for National Statistics so that it could carry out exactly the professional role to which my noble friend has alluded. The CPI is therefore of crucial significance to our measurement of inflation in this country compared with that in all other advanced countries.
My Lords, does the noble Lord accept that there is a strong argument for including fluctuations in house prices in the index? Without that, you run the risk, as we have seen, that interest rates are too low in a housing boom and too high in a severe downturn.
My Lords, the noble Lord knows exactly the problem that follows from his suggestion; namely, if the Monetary Policy Committee of the Bank of England increases interest rates to get a grip on inflation, it would, by that very action, if interest rates were included in the framework of the CPI, be increasing inflation. That is why it is not a practicable proposition to do what he says. It is right to say that we have two indices: one objectively measures our performance against all other economies, and the retail prices index measures much more closely the costs for households. That is the basis of benefits and pensions increases.
My Lords, it is this side; we have had only the opening Question. The noble Lord just said in his reply that the consumer prices index is reviewed only once a year. Is that correct? That surprised me, because the RPI comes out monthly. Does he not agree that ordinary people going out to buy foodstuffs now are totally unconvinced by any of these figures? They see not only their food bills but their fuel bills rising at an alarming rate.
My Lords, of course they do; families are very sensitive to these increases. We are all sensitive to price increases but, by the same token, when the price of certain goods in the basket goes down, that may not be noticed so much. Take the most obvious things: television prices have gone down and so have telephone bills and telecommunications generally. It may be thought that average families are not likely to notice that. They may not notice it, but they appreciate it, because it is reflected in the household budget, unless there is a recondite Member of your Lordships’ House who thinks that families never buy television sets.
My Lords, will my noble friend welcome the concern expressed by Members opposite for the poor of this country, however recent and opportunistic it may be? Will he confirm that the real problem with rising prices of foodstuffs, particularly wheat, rice and milk, is in the third world, where there are extremely poor people who are devastated by what is happening? Will he confirm that our Government will continue to expand and develop our support for the World Food Programme, in contrast to the Tory Government, who halved development assistance?
My Lords, I can confirm the latter point, although it is some way away from the index of inflation in this country. On the earlier point, I emphasise that we did not see any of the measures designed to assist poor families when the Opposition enjoyed the fruits of office, yet their inflation rates were more than double those under this Administration.
My Lords, my noble friend Lady Gardner asked about the frequency of the review of the CPI. Will the Minister answer that?
My Lords, the RPI is about the price of a basket of goods and is adjusted monthly. The CPI is an annual review. Ever since its introduction, it has been an annual review. It is a measurement of year-on-year inflation in the United Kingdom economy.