Consumer prices index(CPI) is the government's preferred measure of inflation, it corresponds with inflation measures
used by other European countries. It excludes mortgage interest payments and council tax.
Retail Price Index(RPI) is the familiar and long-established measure of cost-of-living in the UK.
It includes mortgage interest payments and council tax. But in 2012/2013 statisticians at the Office for National Statistics
found that the formula used to calculate parts of the index had overstated inflation. Despite this it is still used in wage
agreements, commercial lease agreements, regulated rail fares and index-linked government bonds.
CPIH is Consumer prices index(CPI) plus owner-occupied-housing-costs and council tax. An updated CPIH was relaunched
in February 2017 with estimates back to 2005. It is promoted by the Office for National Statistics(ONS) as 'the most comprehensive measure of
inflation'. Despite this ONS intends to make further changes to it.
Back in January 2015, the Institute for Fiscal Studies, a research organisation not linked to the
government, estimated that indexed-linked gilts were costing the
taxpayer an additional £2bn per year because they use RPI. So there is need for a trusted index for cost-of-living.
Since 2008 inflation of owner-occupied-housing-costs, in particular mortgage-payments, has at times been less than CPI inflation so CPIH has often been lower.
Roughly 10% of CPIH is owner-occupied-housing-costs. Mortgage payers will ask themselves 'why so low?' - not
everyone has a mortgage.