[uk_rpi] [why_bother_trying] [RPI_v_CPI_since_1975]

Although the RPI could have been repaired to make it compliant, it seems pretty certain that this is not going to happen. Instead, it seems that it will, effectively, be replaced by the CPIH rather than CPI, both of which are similar sort of measures,  compiled under an EU formula. In fact, the figures indicate that the similarities between CPI and CPIH seem to be greater by far than the differences.

The CPI excludes Council Tax, mortgage interest and some other housing costs. On the other hand, the CPI includes some items which are not in the RPI scope, such as charges for financial services. The
CPIH is defined as the CPI including owner occupiers' housing costs. Whereas the RPI uses arithmetic means to combine prices, CPI and CPIH mainly uses geometric means for combining prices. Effectively, the CPI and CPIH cover a broader population sample than the RPI. For given price data, the CPI and CPIH inflation rates are almost always lower than the RPI inflation rate.

Two charts are attached, comparing CPI with RPI between 1975 and 2019 (December to December). The first shows the increases for single years and the second shows the differences by duration (average and standard deviation). Although it was expected in 2012 that the difference would increase to around 1 % pa, there is still a  relatively steady difference of around 0.7% pa. Last considered several years ago, variations across months (not shown) have been slight. Using random numbers for the difference over 15 years, the average is a slightly higher 0.8%, with 90% limits of 0.54% and 0.97%. Therefore, for 1% to be achieved over periods as long as 15 years would be pretty unlikely, making it hard to understand why one major UK consultancy has an even higher assumption and why this view appears to be generally held. Indeed, anything from 0.9% upwards would be statistically significant.