Select Committee on European Scrutiny Twenty-Second Report


8 Statistics

(27312)

6546/06

COM(05) 539

Draft Regulation laying down detailed rules for the implementation of Council Regulation (EC) No 2494/95 as regards the temporal coverage of price collection in the harmonised index of consumer prices.

Legal baseArticle 285(1) EC; co-decision; QMV
Document originated17 February 2006
Deposited in Parliament24 February 2006
DepartmentOffice for National Statistics
Basis of considerationEM of 7 March 2006
Previous Committee ReportNone
To be discussed in CouncilNot known
Committee's assessmentPolitically important
Committee's decisionNot cleared; further information requested

Background

8.1 Regulation (EC) No 2494/95 provided for Harmonised Indices of Consumer Prices (HICPs) to allow international comparisons of consumer price inflation. They form the basis of the Monetary Union Index of Consumer Prices used by the European Central Bank to monitor inflation. In the UK the HICP is published as the Consumer Prices Index (CPI).

8.2 At present the temporal coverage (time period for collection) of HICP price collection varies widely between Member States, from a single day to a period of several weeks.

The document

8.3 This draft Regulation would set minimum standards for price collection, stipulating that temporal coverage of HICP shall take place over a period of at least one working week around the centre of the month. For products which show sharp and irregular price changes, in particular fresh food, such as fruit and vegetables, and energy products, price collection should be extended to more than one week.

8.4 The Commission argues that the present differences in price collection periods may lead to significant short-term differences in estimated price changes for the time periods being compared and that its proposal would improve the comparability, reliability and relevance of HICPs.

8.5 The Commission notes that the proposal, despite opposition from some, was endorsed by a large qualified majority in the comitology process Statistical Programme Committee[27] — only the UK, Ireland and Germany voted against. It also notes that the European Central Bank issued a favourable Opinion on the proposal.

The Government's view

8.6 The Financial Secretary to the Treasury (John Healey) tells us that Government opposes this proposal. He says that:

  • the proposal does not address a measurement issue relating to the European Central Bank's 12 month inflation target. Differences in collection periods may lead to short-term differences in the estimated price changes of the time periods compared. But they will not have a systematic impact on the 12 month rates of change of the HICP, which is the standard measure of comparability for the HICP and the target inflation measure for the bank;
  • the proposal would impose additional requirements on the comparability of HICPs. It is prescriptive about the precise method of obtaining a representative sample of prices — an important departure from the previous focus on the harmonisation and comparability of outputs;
  • the issue of irregular or volatile price changes is a genuine phenomenon, but it does not lead to systematic bias within or between HICPs. The effect of this proposal would be to smooth out and hide genuine price movements; and
  • implementation of the proposal has the potential to create substantial ongoing costs for the Government and may, depending on the precise methodology used, have a detrimental impact on publication schedules.

8.7 The Minister tells us that the Government will be seeking financial support from the Commission towards implementation costs during the first two years (this possibility is provided for in the basic Regulation). The Office for National Statistics is developing a methodology aimed at minimising additional costs, probably allowing a firmer estimate of implementation costs in early 2007.

8.8 The Minister also tells us that consideration of the proposal in the Council's Working Group on Statistics has seen all Member States except the UK and Ireland supporting the proposal.

Conclusion

8.9 We note the Government has serious doubts about the utility of this proposal. But we note also that it seems probable that the draft Regulation will be approved by the Council, given the opposition of only two Member States.

8.10 However, before considering the document further we should like to known whether the Government has any concern as to subsidiarity, similar to that expressed in relation to the current proposal on statistical classification of economic activities.[28] We note also that there appears to be no reference in the document to a formal impact assessment by the Commission of this proposed legislation. We should like to known whether this is so and, if so, whether what success the Government is having in pressing for one.

8.11 Meanwhile we do not clear the document.


27   Comitology is the system of committees which oversees the exercise by the Commission of legislative powers delegated to it by the Council and the European Parliament. Comitology committees are made up of representatives of the Member States and chaired by the Commission.  Back

28   See paragraph 7 in this Report. Back


 
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Prepared 23 March 2006