Housing costs could become part of inflation measure...

19 May 2010

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1 Comments

Written by rosalind renshaw

Chancellor George Osborne wants to include housing costs in the measure of inflation.

In a letter to Bank of England governor Mervyn King, Osborne said: “Over the longer term I would welcome your views on how we might accelerate the process of including housing costs in the CPI inflation target.”

However, it is not clear what Osborne means by housing costs. While most people would take this to include costs such as estate agency fees, mortgage interest payments, and Council Tax, it is possible that house price inflation might be included.

Housing costs were taken out of the inflation index in 2003 by Gordon Brown when he was chancellor.

But the move has been repeatedly criticised as allowing house price bubbles to develop.

The Bank of England believes that inflation, now at 3.7%, will be below its 2% target later this year.

If house price inflation is to become part of an official measure of inflation, it would certainly make a difference. House price inflation is currently running at an average of 10.5% across the UK, according to Nationwide.

Comments

- markymark
Conspiracy theorists might well argue that inclusion of house prices in the index might help to disguise true inflation if there were significant falls in value (see Nassim Taleb)
- 19 May 2010 15:23 PM

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