Consumer price index in the United Kingdom

For other uses, see Consumer price index.

The consumer price index in the United Kingdom is a family of official price indices produced by the Office for National Statistics (ONS) that measure changes over time in the prices of goods and services purchased by households. The main indices are the Consumer Prices Index (CPI), the Consumer Prices Index including owner occupiers' housing costs (CPIH) and the Retail Prices Index (RPI). CPI and CPIH are constructed from a representative "basket" of around 700 goods and services with about 180,000 price quotations collected each month from shops and online outlets across the United Kingdom.

Since March 2017, CPIH has been the ONS's lead measure of UK consumer price inflation, because it extends CPI by including owner occupiers' housing costs and Council Tax. CPI continues to be produced to international standards and is used for the government's inflation target, which is set at 2% a year on CPI. If inflation moves more than one percentage point away from the target, the governor of the Bank of England is required to write an open letter to the Chancellor of the Exchequer explaining the reasons and the Monetary Policy Committee's response.

The traditional measure of inflation in the United Kingdom was the RPI, which provides official estimates of consumer price inflation from 1947 onwards, and continues to be used in some long-term contracts, including index-linked government bonds and certain pension and rail fare uprating formulas. However, the statistics authorities and the ONS have concluded that RPI has significant methodological weaknesses, including an upward bias partly related to the formula used to combine individual price quotes, and it lost its status as a National Statistic in 2013. RPI is now treated as a legacy index and the UK Statistics Authority and ONS strongly discourage its use when CPIH or CPI is available.

Debate over the choice of index has had implications for monetary policy, public finances and private contracts. A 2019 report by the House of Lords Economic Affairs Committee criticised the continued widespread use of RPI, highlighted the scope for "index shopping", when different indices are used for government receipts and payments, and recommended that the government and statistical authorities move towards a single general measure of inflation for official use.

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