To better reflect the difficulty of the consumer in dealing with inflation there is a new proposal in place by the Office for National Statistics (ONS) to create an index for inflation that will include housing costs.  The new version of the now Consumer Prices Index (CPI) which is used to determine inflation levels will be the CPIH and include housing costs which are presently omitted.  This proposal will help deflect criticism of overlooking housing costs which can make up 10% of the average household spending levels.

Discussions of the new CPIH will continue through August.  The plan will need to be approved by the UK Statistics Authority and upon approval then the ONS will publish the first CPIH in February 2013.  The CPIH will be published alongside the Retail Prices Index (RPI) and the CPI as it currently is constructed which has been used officially by the government to measure inflation since 2003.

The new CPIH will include the cost of what someone would be required to pay a private landlord to rent a home versus the cost of how much a homeowner spends monthly to pay for their homes.

"This method was not suitable as mortgage interest payments are directly influenced by official interest rates, which would make the new index less suitable for use as an inflation target measure, were the government to decide to do so at some point in the future," the ONS said.

The current CPI for April 2012 puts the inflation rate at 3 per cent and the RPI at 3.5 per cent.  The CPI level at 3% is closer to the Bank of England’s goal but is still short of 2%.