4. Topics discussed in the past year

Topics discussed by both Panels in 2021 and 2022 included:

4.1 Introduction of alternative data sources into UK consumer price statistics

Both the Technical and Stakeholder Panels received regular progress updates regarding the inclusion of new data, methods, systems, and processes in the production of headline UK consumer price statistics. Both panels were presented with details of proposed methods and impact analyses, with a particular focus on rail fares and second-hand cars, and provided guidance on timelines, priorities, and presentation of the indices, as well as risks and readiness. Both panels provided helpful feedback on published documentation surrounding difficult topics such as the choice of index number method for use with alternative data sources.

Specifically, the Stakeholder Panel discussed the length of time required to ascertain the impact of changes, suggesting a year would be the minimum time period required to understand seasonal effects. The Stakeholder Panel also noted concerns around the reliance of the new indices on contracted data feeds rather than physical collections and requested detailed contingency plans be discussed in early 2023.

In addition, the Technical Panel discussed several topics related to the theoretical and practical calculation of price indices using new data sources including:

• methods specific to the production of indices for rail fares and second-hand cars, in particular how a homogeneous product should be defined within these categories;
• choosing a suitable index method for elementary aggregate calculation within alternative data sources, and how to integrate this with the traditional annual fixed basket approach;
• choosing an appropriate method of data cleaning to remove dubious observations within big data;
• additional research into the use of scanner data (namely groceries) in UK consumer price statistics, including accounting for refunds, discounts, size changes, classification methods, aggregation, imputation and weights;
• research into the use of web-scraped data in UK consumer price statistics, including handling products with high churn and approximating expenditures for web-scraped data.

4.2 Private rental price statistics transformation

ONS engaged with both panels regarding the development of private rental price statistics using data from the Valuation Office Agency (VOA), including methods, timelines, and communication. As well as impacting users who use the Index of Private Housing Rental Prices (IPHRP), these rental statistics are also used in constructing the private rentals index within CPIH, CPI and RPI, and the owner occupiers’ housing costs (OOH) index in CPIH. These discussions have been redacted due to their market sensitive nature.

4.3 Continuing development of the Household Costs Indices and Sub-group measures

The publication of Household Costs Indices (HCIs) and CPIH-consistent subgroups was suspended over the coronavirus pandemic, and ONS discussed with the panels how estimates should be calculated for this period of time. As a result of this discussion, no changes were made to the lag in Living Costs and Food Survey data used to derive democratic weights and subgroup-specific baskets; however, bespoke subgroup-level imputations for unavailable items were made in the HCIs. The fourth preliminary estimates of the HCIs were successfully published in May 2022.

Both panels discussed ONS’s review of the methodology for calculating the change in mortgage interest payments. The existing RPI approach was compared with the simple revaluation approach (used by other countries) and a new “lenders’ formula” method, based around amortised loan repayments. The Technical Panel also suggested an alternative approach – the Benet – that had been used by Eurostat. The Stakeholder Panel was supportive of a method such as the lenders’ formula method, which reflects what households actually pay, but requested some supporting sensitivity analysis to understand how the method works in different scenarios. It was also clarified that no changes to RPI would be made based on this research.

Future plans for the HCIs were also discussed. The Stakeholder Panel supported the letter from the Royal Statistical Society, that asked that a more frequent publication be expedited in response to the ongoing cost of living debate. In response, ONS aim to move the HCIs onto a quarterly publication in 2023. In the meantime, ONS have resumed the quarterly publication of subgroup inflation measures on a CPIH-consistent basis. The panels supported ONS plans to commission research into ways to capture variations in the prices paid by different types of households.

4.4 Considerations for the consumer prices collection and compilation, and production of annual weights

ONS continued to engage with both panels on plans for the annual updating of weights, where it has been necessary to adapt usual processes to account for large shifts in the expenditure distribution between years as a result of the coronavirus pandemic. Following discussion with the panels, the approach for 2022 was consistent with that used in 2021, and the same approach was endorsed for the 2023 update.

4.5 The Retail Prices Index

The panels were kept informed of the Judicial Review that followed the response to the consultation on the reform of the Retail Price Index (RPI) methodology.

ONS also shared thoughts on how future minor errors in the RPI should be presented. However, there are no plans to change the current RPI revisions policy that, once the RPI is published, the indices are never revised.

4.6 Additional measures to support public understanding of changes in supply chains and the cost of living

ONS shared with the panels how they had been collaborating with several areas in the organisation, such as the Data Science Campus and Digital Content, to:

• release the personal inflation calculator in May 2022, providing users a personalised inflation rate based on their spending behaviour,
• publish experimental estimates tracking the lowest cost grocery items in May and October 2022; using web scraped data and showing how those on a lower income were affected by rising food prices,
• coordinate a large ONS hybrid event in October 2022, to help with the debate and understanding of cost of living and where it may be heading.

Topics specifically discussed by the Stakeholder Panel included:

4.7 Sub-national measures of consumer prices and the Northern Ireland boost

Having previously expressed interest in sub-national measures of consumer prices, the Stakeholder Panel were updated on progress towards producing sub-national measures of consumer price statistics, including a pilot survey to boost the number of prices collected in Northern Ireland, and considering how best to integrate scanner data in a way that will allow for future production of sub-group estimates.

4.8 Development of the Statistics User Network

The Stakeholder Panel specifically discussed the development of the Statistics User Network and proposed improvements. The panel welcomed the development but suggested ONS should build on existing content and improve the presentation, engagement on and promotion of the forum.

4.9     Johnson Review of UK Consumer Price Statistics

The Stakeholder Panel reviewed progress against the recommendations in the Johnson Review of UK Consumer Price Statistics noting that the majority of recommendations had been completed. The panel further noted that any incomplete recommendations had been included within the ONS Consumer Prices Development Plan and prioritised accordingly so they were either in progress or were not currently being worked on but had been assigned an expected completion date. As a result, the panel agreed that their Terms of Reference would be amended so they no longer mentioned the Johnson Review.

Topics specifically discussed by the Technical Panel included:

4.10 Faster indicators methodology

In early 2021, the Technical Panel discussed challenges in the methodology for producing weekly price indices, including issues with drift with frequent chaining. These weekly indicators were set up as part of the ONS response to the COVID-19 pandemic and ceased production in September 2021.

4.11 Treatment of the UK Government support package rebates

Following the announcement by the UK Government that a package of support would be provided to help households to manage rising energy bills, a paper was sent to the Technical Panel by correspondence to seek advice on the treatment of the Council Tax rebate in consumer price statistics. The panel endorsed the proposal to not reflect the rebate in consumer price inflation statistics, consistent with the decision to treat the rebate as income in the National Accounts. The panel also endorsed the proposal to use the ONS decision for future classifications, unless there was a good reason not to.