Using the RPI Series

Suppose that one knows the money amount (price, cost, or value) of something in a specific year. That "something" could be the price of a good or service, a wage rate, the amount of an asset or a debt, or government spending on certain items. In fact, the money amount can pertain to anything. This calculator provides the "purchasing power" of that same amount of money in another (second) year. Usually, the specific (original) year is sometime in the past, and the other year is the present day; but the calculator accepts any two distinct years.

The way the calculator works is to multiply the money amount by the ratio of the retail price index in the other year to the retail price index in the original year. It should be noted that in many countries the "retail price index" is termed the "consumer price index." Consider as an example that "Big Ben" (the giant bell at the top of the clock tower of the Houses of Parliament—not the clock itself or the clock tower, common but incorrect usage of the designation "Big Ben") had a cost of £572 in 1858 (after subtracting the value of the metal obtained from an earlier bell). Applying the calculator, the purchasing power of the original (year-1858) cost of "Big Ben" was £36,062 in the year 2002.

Prior to February 15, 1971 ("Decimal day," or "D-day"), monetary amounts in the U.K. were expressed as pounds (£), shillings (s.), and pence (d.), where £1 = 20s. = 240d. On February 15, 1971, the pound was decimalized, so that £1 = 100 (new) pence. So one (new) penny = 2.4 old pence. The calculator treats all pence involved in amounts for original year prior to 1971 as old pence.

Other comparison series might be preferable, depending on the context of the question. For more choices consult Five Ways to Compute the Relative Value of a UK Pound Amount, 1830 - 2004, where you will find further discussion of this issue.

Of course, the official retail price index as such began to be computed only in the 20th century. In fact, the measure used by the calculator uses the official series only from 1948 onward. For earlier years—from 1947 all the way back to 1264—the series of various economic historians are incorporated. The component series are linked appropriately so that a consistent "retail price index" (or rather, approximate "retail price index") series is obtained continuously from 1264 to the present. For details of this procedure and the data sources employed, please consult What Were the U.K. Earnings Rate and Retail Price Index Then? A Data Study.

So it is wise to view the results obtained using the calculator with awareness of their limitations. First, the retail price index—even if a "true" series exists—is not the only measure, perhaps not even the best measure, for computation of purchasing power over time. Just one reason why the retail price index may not be the most appropriate measure is that prices of goods and services purchased by households or consumers alone are incorporated; neglected are the purchases of business firms and governments.

Second, it is in the nature of statistical data that perhaps no "true" series of the retail price index is obtainable. An official series is acceptable beginning with the year 1948. For earlier years, privately constructed series are utilized, and they are probably further away from the ideal than even the official series.

Nevertheless, this calculator has the great advantage of applicability to all years from 1264 onward. Other than the U.K., very few countries can boast a price index that can be constructed continuously over so many centuries all the way to the present. It is the long span of time for which it is available, that makes this calculator unique.