In April 2020, the Technical Panel discussed contingency planning for the consumer prices collection during the COVID-19 pandemic, when certain types of goods were not available to consumers and the price collection in the field had to be temporarily suspended. In July, the Technical Panel discussed the proposed strategy for resuming normal price collection after the affected periods. In the October and December meetings, the production of expenditure weights for 2021 were discussed.

Initially, the Panel made a number of recommendations on how to handle items that were unavailable for consumers to purchase, either due to market closures or stock shortages. A range of imputation methods were discussed as well as the idea of collecting prices for items temporarily out of stock, contrary to usual procedures, and investigating whether chain shop prices could be used as a proxy for imputing local shop prices. There were mixed views about how to address items exhibiting seasonality, with some in favour of imputing seasonality and others opposed.

The Panel made suggestions for work that could be done retrospectively, where it was not feasible in the short-term. Some members advised considering revisions to published indices when better methods for dealing with outstanding problems had been developed. It was also suggested that the short-term and long-term impacts of COVID-19 on consumption patterns should be investigated. Prof. Smith proposed expanding his work on estimating variance in the CPI to look at this period in greater detail.

In the discussion on returning to price collection in stores, the Panel emphasised that the primary objective should be to measure inflation in a valid way and that measuring price change between the pre-lockdown and post-lockdown periods without introducing bias should be a priority. Following this advice, the products collected in March 2020, prior to the field collection being suspended, were used as the basis for the collection in August 2020, when the field collection began to be resumed.

Much of the weights discussion focussed on the Eurostat guidance on the Harmonised Index of Consumer Prices (HICP), which recommended basing 2021 expenditure weights on 2020 spending patterns, to the extent that this was possible, rather than the 2019 expenditure that would have been used in normal circumstances. Panel members were concerned that the usual ‘fixed weights’ approach would not be appropriate for 2021 given the uncertainty around the period. The Panel believed there should be flexibility in the guidelines to enable national statistical institutes to adapt their weighting schema in real time to respond to events as they unfold, and therefore better reflect spending patterns. They advised that changes should only be made where it became clear that existing weights were not reflective of consumer spending. It was agreed that ONS would provide feedback to Eurostat on the weights guidance on behalf of APCP-T. The APCP-T feedback is reproduced in Annex B.

Within the context of the Eurostat guidelines, the Panel were supportive of ONS’ proposed framework for calculating 2021 weights, including the intended approach of only adjusting the most severely affected spending categories.

The Stakeholder Panel generally supported the production of a supplementary index based on rescaled expenditure weights to reflect the changes in consumer spending patterns during the pandemic. The Panel also encouraged ONS to reflect the impact of COVID-19 in the Household Cost Indices (HCIs), especially since the rescaling would vary between different groups of individuals.

At their meeting in May 2020, the Stakeholder Panel urged ONS to consider the effect from suspension of the House Price Index (as a result of there being insufficient transactions to produce a robust HPI estimate) on RPI, particularly given the use of September’s RPI in pension calculations.

The Stakeholder Panel thanked ONS for their work in developing a strategy to account for reductions to VAT and the Eat Out to Help Out scheme that were introduced in July/August 2020, and encouraged ONS to providing clear guidance on its implementation. They noted the potential for a step change to the indices in August, as the policies come into effect, and the importance of the September index for pension and benefit calculations.

The Stakeholder Panel also discussed the approach to calculating annual weights and agreed that flexibility is important. A Panel member asked if there is scope to report results on varying weight structures, but it was felt this would be confusing to users. However, Panel members considered that having a research paper outlining the different approaches would be beneficial. Panel members also raised the issue of public perception of the changes, as it was difficult to understand the theoretical considerations for basing the weights on different time periods.

There was resounding positive feedback and appreciation of ONS from both Panels for the ongoing work to continue the regular production of consumer price statistics during this pandemic, and to keep the public informed about price developments.

The Technical Panel discussed the consultation on the reform to the RPI. The panel had previously agreed that the method presented in the consultation was the only statistically appropriate approach, as noted in the minutes from the meeting of November 2019. A joint Technical Panel response was discussed and ONS agreed to prepare a draft reflecting their views. Whilst panel members agreed on the linking method, it was recognised that there were different views around other aspects of the consultation, and panel members may wish to opt out of a combined response. The APCP-T response to the RPI consultation is provided in Annex C.

The Stakeholder Panel discussed the RPI consultation at a meeting on 3 April 2020. There was consensus on some of the issues – but also a wide range of views on others. There was general support from the Panel for the proposed method for transition – which was recognised as straightforward – and no alternative method was proposed. The Panel reiterated their strong view that, were the changes to bring RPI in line with CPIH data sources and methods to take place in 2025, there should be no subsequent divergence between RPI and CPIH in the period before 2030 (after which the ONS would be able to continue improvements to RPI and CPIH without needing to refer to the Bank of England and the Chancellor).

The members of the Stakeholder Panel were divided on the merits of the proposal.
A minority of panel members felt strongly that the proposal was a mistake, and that not all the ‘flaws’ in RPI identified by the ONS were in fact flaws. In particular, the majority of the Stakeholder Panel did not support moving to one price index for all purposes and considered there was a risk that this would be the de facto outcome from the proposal. It was notable that the consultation document did not refer to the Household Cost Indices (HCIs). And while the majority view favoured a move towards either CPI or CPIH, the advice from the Panel was clear that a minority strongly disagreed. The APCP-S response to the RPI consultation is provided in Annex D.

The Technical Panel discussed a paper presented by Martin Weale which explored the theoretical underpinning of the HCIs. Most of the panel members felt the paper made a useful attempt to relate the concepts of the HCIs to mainstream economic theory; there was a view that the paper was important for helping with interpretation and understanding of the HCIs. One member argued that greater importance should be placed on simplicity and practical considerations rather than economic theory, and this view was supported by a Stakeholder Panel member in their subsequent meeting.

The Technical Panel also discussed the higher education component of the HCIs, including methods to calculate tuition fee repayments, to include tuition fees paid upfront and to remove maintenance loans.

The Panel suggested that a general approach for voluntary and mandatory payments was required for the HCIs, beyond the tuition fees component. It was suggested that voluntary student loan repayments should be included in the weight of the student loans repayment component, rather than including a price component for these. To calculate repayments, the Panel recommended applying the repayment threshold to microdata on graduate salaries from the Labour Force Survey (LFS), rather than applying the threshold to an aggregate measure of graduate salaries such as the mean.

The Technical Panel also discussed the measurement of interest payments on financial debt. The panel made various suggestions for how to treat specific types of financial debt, as well as discussing more generally the principles for measuring interest payments.

The Stakeholder Panel were grateful to ONS for the rich analysis in the third preliminary estimates of the Household Costs Indices, and for continuing to develop the HCIs in the current circumstances. They also discussed the roadmap to National Statistic status for HCIs, and noted that 2025 was an appropriate date to aim for, and that the timeline was achievable. The Panel overall felt that the HCIs will be an invaluable resource for policy makers and others who need to reflect the experience of people and households.

Index number framework

The Technical Panel was presented with the criteria and scoring system ONS have developed to assess the appropriateness of elementary aggregate methods for use on web scraped and scanner data, and the resulting shortlist of methods obtained. There was discussion around the value of the exercise being undertaken, with a Panel member expressing that similar research comparing index number methods already exists and shows that there is no single best index method. Another Panel member expressed that a more holistic method should ultimately be used to choose out index methodologies, as an inflexible scoring system may have flaws. ONS clarified that the framework exists to guide and to provide focus on a subset of methods, not to dictate. Other advice included avoiding using more than one approach for the index method, extension method or window length, expect possibly for the different data sources (scanner data and web scraped data).

Classification methods

The Technical Panel was presented with the progress to date on developing automated methods to classify web-scraped clothing data. The Panel made several suggestions to feed into the work, including on how to train and assess the performance of the classifier. The Panel also raised international work being done on the subject of classification: The UN High-Level Group for the Modernisation of Official Statistics (UNECE HLG-MOS) had created a Machine Learning Project and the UN Global Working Group (GWG) on Big Data planned to look into classification soon. It was also noted that research by Eurostat showed that the way in which features were generated and the percentage of labelled data were more important than the algorithm used to classify the data.

The Stakeholder Panel was enthusiastic about the prospect of broadening consumer price collection to include alternative data sources. However, Panel members considered that they should fulfil a due diligence role encompassing the likely cost benefits and risks. In particular, the Panel queried what thought ONS has given to the risk of retailers withdrawing their data. ONS advised that it has data access agreements in place with retailers which include a notice period, and, as a contingency plan, ONS would revert to current central and local price collection.

In April 2020, the Technical Panel discussed a proposed approach for producing a historical series for the Consumer Prices Index including owner occupiers’ housing costs (CPIH) from 1947 to 1987, based on the modelled CPI historical series over the same period. This followed revision of CPI data between 1988 to 1996 which affected the earlier CPI estimates. Results from work undertaken to recreate the CPI historical series and to investigate the impact of revised data were also presented.

The Panel felt that it would be useful to have a consistent CPIH series for people to refer to, despite the limitations of the estimates – a view reinforced by many members of the Stakeholder Panel.

In October 2020, the modelled estimates for CPI and CPIH were presented. The presentation of the series to be published were discussed; the Panel emphasised the need to communicate the fact that the estimates were modelled rather than based on observed data. ONS plans to publish the CPIH historical series as a table in an appendix in an analytical article; however, the Panel felt there was some value in also presenting the estimates as a time series dataset, but with a separate identifier to the official CPI and CPIH historical series.

The Consumer Prices Development Plan for 2021 was discussed by the Technical and Stakeholder Panels.

As part of the Technical Panel discussion, Panel members were invited to ask the National Statistician about his priorities for consumer price statistics. Sir Ian stated that his highest priorities for price indices were clarity on the future, long-term consistency, and insight. He emphasised the need for ONS to provide data in real time and reduce manual collections, and to provide more insight into what their data means. He also emphasised the need for flexibility, since the economy and society being measured are changing, citing the rapid development of the COVID-19 Infection Survey and Faster Indicators of economic activity.

The Stakeholder Panel fully supported the development of the Household Cost Indices (HCIs), especially the development of further indices for different household groups and moving from an annual to a quarterly basis. They also noted that the alternative data sources project is ONS’ highest priority for consumer prices, and strongly agreed that care should be taken to ensure that the use of alternative data sources in ONS’ headline measures of consumer price statistics is adequately resourced and is not rushed. They also discussed the extent to which ONS’ response to the coronavirus (COVID-19) pandemic would impact on the proposed development plan. They also expressed an interest in private rents development given that ONS now have access to Valuation Office Agency (VOA) microdata.

The Technical Panel discussed the reinstatement of the HPI after it was suspended from April onwards due to insufficient data on housing transactions. The Panel suggested that the variance of the HPI could be investigated in the longer-term, while the residuals in the hedonic model could be examined in the short-term. The Panel also advised testing the resilience of the model to biased data in case the transactions after the HPI was reinstated were not representative of those before its publication was paused.

Prof. Smith presented a review of published work in estimated errors for a Consumer Price index to the Technical Panel. The Panel found the paper to be very useful, with a suggestion made that a further metanalysis could be performed with data across various countries. However, the Panel had mixed views on which of the methods detailed in the paper was the best approach to take.

The Stakeholder Panel discussed ONS’ progress to produce new statistics for the private rental market based on prices microdata from the Valuation Office Agency (VOA). The Panel acknowledged the importance of accurate rental statistics given their future inclusion in the CPIH for private rents and owner occupiers’ housing costs, which together account for a fifth of the 2020 CPIH basket of goods and services.

Since the January 2020 Stakeholder Panel meeting, when this topic was first discussed, the development work has continued apace and the outcome of this development work will be presented at future Technical and Stakeholder Panel meetings. When the methodology update is published ONS will enter a user consultation period in Spring to Summer 2021, as outlined in their updated private rental prices development plan.

The Stakeholder Panel discussed ONS’ progress to produce new statistics for the private rental market based on prices microdata from the Valuation Office Agency (VOA). The Panel acknowledged the importance of accurate rental statistics given their future inclusion in the CPIH for private rents and owner occupiers’ housing costs, which together account for a fifth of the 2020 CPIH basket of goods and services.

Since the January 2020 Stakeholder Panel meeting, when this topic was first discussed, the development work has continued apace and the outcome of this development work will be presented at future Technical and Stakeholder Panel meetings. When the methodology update is published ONS will enter a user consultation period in Spring to Summer 2021, as outlined in their updated private rental prices development plan.

The Stakeholder Panel were given an overview of a project to improve the range of price statistics publications available to users.  The Panel welcomed the ONS’ desire to make the UK’s inflation statistics clearer and more accessible, and the ambition to reduce the volume of commentary to focus on key messages e.g. the key movements, drivers and contributions.

Members of the Technical Advisory Panel for Consumer Prices have been appointed for their expertise rather than their institution.

Dame Kate Barker would like to thank Matthew Whittaker for his contribution to the Stakeholder Panel, and welcome James Smith, who will represent the Resolution Foundation following Matthew’s departure.  Dame Kate would also like to welcome Daniela Silcock, who joins representing the Pensions Policy Institute.