FOI REF: FOI-2024-2034
You asked
Please let me know:
- How public sector services are incorporated in RPI and other inflation data.
- How the quality of public services is included in the indices.
- Do you take account of reduced services when including prices charged by public bodies?
We said
Thank you for your query about how public sector services are incorporated in RPI and other inflation data.
Public sector services are included in the consumer prices inflation measures where a fee is charged and where they are consumed, or used, by households, as opposed to businesses or other government departments. Depending on your definition of public sector, these could include NHS prescription charges, NHS dental charges, local authority rents, fees for registering births, deaths and marriages, passport fees, the television licence, driving test fees and school meals. The indices also include vehicle excise duty, while the RPI and Consumer Prices Index including owner occupiers’ housing costs (CPIH) - but not the Consumer Prices Index (CPI) - include Council Tax.
The price indices are based on administrative data either supplied by government departments or collected from relevant websites. The information may take the form of a specific charge or a range of charges depending on the services offered. For example, NHS prescription charges, NHS dental charges, birth/death/marriage fees, passport fees, the television licence charge, driving test fees, Council Tax and vehicle excise duty are all collected from various government related websites and the number of prices collected for each depends on the range of charges and services available. Local authority rents and Northern Ireland rates are provided by central government and regional parliaments.
Once the indices for individual items are compiled, they are weighted together with other items based on spending information from a variety of sources, principally the Household Final Consumption Expenditure data from the National Accounts and the Living Costs and Food Survey (a survey of households conducted by ONS). Chapter 8 of our technical manual1 describes the weights compilation process, while chapter 3 and section 12.4 cover the aggregation process for CPIH/CPI and RPI respectively.
Our aim across the whole sample of items making up the consumer price indices is to collect prices for products or services of consistent quality over time. If the quality changes for a particular product or service but in a relatively minor way, then we would treat the changed service as comparable and use the associated price in compiling the indices. If the change in quality were larger, we would then consider it non-comparable and not use the quote in the calculation of the indices for the latest period. There is a more detailed description of this in section 9.3 of our technical manual1. Section 9.3c is most relevant for these services.
The degree to which we can follow this concept of consistent quality for public services depends on the amount of information available. For example, for passport fees, the website contains information on the service offered but for items such as Council Tax, we would have less information on the specific services offered to make any such adjustments. Our quality and management information page 2 on our website summarises the consumer price indices against international measures of quality.