Price Comparisons June 2008

Comparison of consumer prices June 2008

Statistics Unit: www.gov.je/statistics

Headlines

• The annual changes in the RPIs in Jersey, Guernsey and the UK were higher in June 2008 than in June 2007, with global increases in commodity and oil prices being key group level drivers to the rates of increase for all jurisdictions.

• The introduction of the Goods and Services Tax in Jersey accounted for about

1.9 percentage points of the overall annual change in the Jersey June 2008 RPI, spread across the groups. The annual change in RPI(Y), a measure of underlying inflation which removes the effect of mortgage interest payments as well as the effect of indirect taxes, was 3.9% in June 2008 in Jersey compared to 4.9% in the UK.

• Over the last year, the Food group of the RPI increased by 13% in Jersey, 10% in the UK and 7% in Guernsey. If the effect of GST is removed, Food prices in Jersey increased at the same rate as in the UK (10%) from June 2007 to June 2008.

• Direct food comparisons show that average meat prices were about 13% higher in Jersey than in the UK in June 2008 and the cost of fresh fruit and vegetables in Jersey were over a quarter higher.

• Largely as a result of different rates of increase of impôts and duties since June 2000, alcohol and tobacco prices have seen greater overall increases in Jersey and Guernsey than in the UK.

• Over the last eight years motoring costs, overall, have increased significantly more in Jersey and Guernsey than in the UK.

• Pre-tax prices for alcohol, tobacco and motor fuels are higher in Jersey than in the UK: alcohol by over a quarter; cigarettes by more than four-fifths (82%); and petrol and diesel by around a third.

• Pre-tax  prices  of  beer,  whisky  and  petrol  are  slightly  lower  in  Jersey  than Guernsey; whereas the pre-tax price of tobacco is similar in both jurisdictions.

Contents

Page

Headlines  1 Introduction  3 Overall RPI level analysis  5

Individual group level analysis

Food   11 Catering   22 Alcoholic drinks   23 Tobacco   25 Housing   27 Fuel and light   30 Household goods   31 Household services   31 Clothing and footwear   33 Personal goods and services   34 Motoring   36 Fares and other travel costs   39 Leisure goods   40 Leisure services   42

Comparison with the Isle of Man   42 Annex A: Average prices of matched items in Jersey

and the UK 2000-2008   43 Annex B: Average prices of matched items in Jersey,

Guernsey and the Isle of Man 2007–2008   47

Introduction

The simplest way to think about the Retail Price s Index (RPI) is to imagine a shopping basket' containing the various goods (e.g. bread, televisions, wardrobes) and services (e.g. doctors, dentists, hairdressers) on which people in Jersey typically spend their money. As the prices of the various items in the basket change over time, so does the total cost of the basket. On or around the 15th day of March, June, September and December the current total cost of the basket is calculated and then compared with the total cost a year earlier, showing how much the total cost has changed over the twelve month period.

In principle, the cost of the basket should be calculated with reference to all consumer goods and services purchased by all households, and the prices measured in every shop or outlet that supplies them. In practice, this is impossible so the RPI is calculated by collecting a sample of prices for a selection of "representative" goods and services from a range of Jersey retail outlets and service providers. The RPI is calculated from around 2,500 separate price quotations in total. The same approach is adopted in other jurisdictions (e.g. by the Office for National Statistics in the UK) for the compilation of retail price indices.

The other essential element of the RPI is to ensure that the items are weighted. Weights are needed in the RPI to ensure that items which account for more of a household budget (e.g. housing costs) are given more importance in the index. Without weighting items, the change in the price of a kilogram of cheese, for example, would have the same impact on the RPI as a change in mortgage interest rates.

To ensure that the contents of the RPI basket of goods and services, and the associated expenditure  weights,  remain  representative  of  actual  household  spending  they  are reviewed on completion of each round of the Jersey Household Expenditure Survey (HES). The HES involves the analysis of detailed expenditure information from over 1,000 households covering in excess of 300,000 individual purchases.

The purpose of this report is to compare prices in Jersey, Guernsey and the UK by looking at the RPI for each jurisdiction. The RPI is composed of 14 groups with each group being composed of several sections (85 in total) and each section being made up of a number of items:

RPI Structure

All items RPI Groups e.g. Food Sections e.g. Bread

Items e.g. Sliced white loaf

This report examines the rate at which prices have changed by looking at the behaviour of the groups and sections in the various jurisdictions. Additionally, direct comparisons of  prices  are  made  where  possible in order to give an indication of price  levels1. Throughout the report the figures show component series of the RPI whilst the tables show actual prices. The RPI data are informative of the rate of change in prices, but do not lead to any conclusions on relative price levels.

In considering the analysis it is important to remember that the data relate to average (mean) prices in each of the jurisdictions. Whilst averages are the correct way to present such an analysis, there will of course be differences in the prices of items in shops throughout each jurisdiction; some prices will be lower than the average and others higher. In addition, for the UK there will also be differences across regions and even within regions2.

Another source of difference that can affect price comparisons is quality, and the fact that higher quality goods or services generally cost more than lower quality ones. This fact is accounted for in the RPI by ensuring the index is representative of the range of products available for a specific item. However, in using the comparisons it is important to remember that a higher quality product is likely to be priced above average.

In the UK, an Expenditure and Food Survey (EFS) is carried out annually by the ONS to highlight  changes  in  spending  patterns  so  that  items  in  the  RPI  can  be  adjusted accordingly. As noted above, the States of Jersey Statistics Unit runs a similar survey, the Household Expenditure Survey (HES), every five years. The most recent HES survey was completed in October 2005 and subsequently the "basket" of goods and services used to compile the Jersey RPI was reviewed.3 The Guernsey Policy and Research  unit  also  runs  a  HES,  the  most  recent  being  the  2005/6  survey.  A consequence  of  the  different  timing  between  jurisdictions  is  that  newer  brands, specifically lower cost alternatives to named brands, may be included in the UK analysis sooner. Such differences will not affect rates of change, but may, depending on take up, affect price level comparisons.

Many factors will influence the rate of change in the price of a product or service and its absolute level at any one point in time. For example a product could be rising in price at a faster rate in one jurisdiction than another but may be starting from a lower price base, so a greater rise in price does not necessarily mean it is more expensive. Equally, whilst data for eight years is shown throughout this report, June 2000 may represent a high or low point in the cost of a product or service and therefore the focus should be on more recent behaviour.

A major difference between the three jurisdictions is the type and amount of tax that is imposed on certain goods and services. Many items are subject to VAT in the UK at the rate of 17.5%, whilst a consumption tax was introduced in Jersey in May 2008 (the Goods and Services Tax, GST) at a rate of 3%. Guernsey does not currently have a

1 Direct comparisons of prices are based on information published monthly by the Office for National Statistics (ONS) which shows the average price of around 60 non-brand items which are included in the UK RPI. Guernsey figures are supplied by the Guernsey Policy and Research Unit.

2 Relative Regional Consumer Price Levels in 2003: Ball and Fenwick.

3 For more information see the Statistics Unit report entitled Retail Price s Index: Review of the basket of goods and services 2007; available from www.gov.je/statistics.

comparable tax in place. The impact of the different tax structures on price changes and price levels is discussed throughout the report where relevant.

Despite all the points to note on interpreting the data given above, this type of exercise has real value. It highlights the product or services groups where price changes are causing the greatest upward pressure on inflation, and, where there are differences in the rate of change of prices, these can be considered further and better understood. In addition, this exercise can show how actual prices differ between Jersey, Guernsey and the UK.

Overall RPI analysis

The rate of inflation as measured by the Retail Price s Index (RPI) has increased at a greater rate, overall, in Jersey than in the UK since 2000. There have been two distinct periods: from 2000 to 2005 prices increased at a considerably faster rate in Jersey; whereas from 2005 to date the rate of increase has been similar for both jurisdictions.

The Jersey RPI increased by almost 40% between June 2000 and June 2008, whilst the UK RPI increased by about 27% (Figure 1). More recently the RPI rose by 13% between June 2005 and June 2008 in both jurisdictions.

The behaviour of the Guernsey RPI has been similar to that of Jersey, with the index rising by 38% between June 2000 and June 2008 and by 14% between June 2005 and June 2008.

Figure 1: Jersey, Guernsey and the UK RPI (all items) June 2000 to June 20084

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100 Jersey 90 UK

Guernsey

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Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08

The annual change from June 2007 to June 2008 was 5.6% in Jersey compared to 4.6% in the UK and 5.5% in Guernsey over the same period. The underlying rate of inflation, measured by RPI(X) was 5.8% in Jersey in June 2008, 4.8% in the UK and 5.4% in Guernsey.

4 In Figures showing comparative movements of indices, UK and Guernsey indices have been re-based to June 2000 = 100 to match the most recent Jersey base period.

The annual percentage changes in the headline and underlying rates of inflation for each jurisdiction, as measured by RPI and RPI(X) respectively, are shown in Figures 1a and 1b.

Figure 1a: Annual percentage change in RPI: Jersey, Guernsey and the UK 2001-2008

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Jersey

1 UK

Guernsey 0

Figure  1b:  Annual  percentage  change  in  RPI(X):  Jersey,  Guernsey  and  the  UK 2001-2008

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1 UK

Guernsey 0

The annual change in the Jersey RPI in June 2007 (4.3%) was lower than that for the UK RPI (4.4%) for the Guernsey RPI (4.7%). Jersey's annual change in June 2007 for RPI(X)  was  also  lower  than  that  in  the  UK  and  Guernsey  (2.3%,  3.3%  and  3.1% respectively). As noted above, the annual change in both the RPI and RPI(X) in Jersey, from June 2007 to 2008, was higher than that seen in the other jurisdictions. This was mainly due to the introduction of GST in Jersey, which contributed about 1.9 percentage points to the latest annual change in Jersey's  RPI. This effect is clearly visible in Figures 1a and 1b.

Group analysis of growth in RPI

Considering the groups together shows whether different price pressures are evident in each jurisdiction. Figure 2 shows the contribution in percentage points that each group made to the most recent overall annual change in the RPI (this means the total of all the group changes equals the overall annual change). This Figure shows that in both the UK and  Jersey  the  biggest  upward  pressure  occurred  from  the  Food  group,  which contributed 1.1 percentage points to the overall index in the UK and 1.3 to the overall index in Jersey. In Guernsey the Food group was also a key driver, contributing 0.9 percentage points.

Figure 2: Percentage point contribution to overall annual change in RPI June 2007 to June 2008

Food Catering

Alc Drink Tobacco Housing Fuel/Light Hhold goods Hhold servs Clothing Pers G&S Motoring Fares,travel Leis goods Leis servs

-0.4 -0.2 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 Percentage points

Since the annual rate of inflation is often different for each jurisdiction, it can make direct comparisons based solely on percentage point movements difficult. Therefore Figure 3 shows the percentage contribution that each group is making to the total increase in RPI in each jurisdiction.

Figure 3: Percentage change in each group in RPI June 2007 to June 2008

Food Catering

Alc Drink Tobacco Housing Fuel/Light Hhold goods Hhold servs Clothing Pers G&S Motoring Fares,travel Leis goods Leis servs

-10 -5 0 5 10 15 20 25 30 Percentage

Such analysis could be susceptible to different weights being used in each of the RPIs; for example, if a group had a larger weight in Jersey than in the UK then the same price rise for that group would result in a larger impact on the Jersey RPI. However, broadly speaking, the weights are similar in all three indices, with any differences being easily understood.

Personal goods and services has a weight of 6.5 out of 100 in Jersey compared to 3.9 in the UK and Household services has a weight of 9.0 in Jersey compared to 6.5 in the UK. Personal  goods  and  services  has  a  larger  weight  in  the  Jersey  RPI  because  the proportion of average expenditure on health and personal care is higher in Jersey than the UK. Similarly, Household services, which includes school fees, has a larger weight in the Jersey RPI because the proportion of average expenditure on private education is higher in Jersey than in the UK.

Figure 3a: Jersey 2007 and 2008 RPI group percentage changes

Figure 3b: UK 2007 and 2008 RPI group percentage changes

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Figure 3c: Guernsey 2007 and 2008 RPI group percentage changes

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Figures 3a, 3b and 3c show an overall view of how the annual percentage changes of the RPI groups have differed between the year to June 2007 and the year to June 2008 for each jurisdiction. For example, Food and Fuel & light costs increased at a greater rate in 2008 in all jurisdictions, reflecting global trends. In contrast, Housing costs were higher in 2007 compared to 2008 in all jurisdictions, reflecting lower mortgage interest rates in 2008.

A key factor in Jersey's annual change to June 2008 was the effect of GST, which accounted for about 1.9 percentage points of the overall change in the Jersey RPI, spread across the groups. GST did not have any effect on the annual change to June 2007, as the tax was not introduced until May 2008. It is important to keep in mind the effect of this new tax in Jersey when comparing recent data. RPI(Y) is a measure of underlying inflation which removes the effect of mortgage interest payments as well as the effect of indirect taxes. Given the effect of GST in June 2008 it is informative to consider RPI(Y) in more detail.

Figure 3d: Percentage point contribution to overall annual change in RPI(Y) June 2007 to June 2008

Food 1.1 Catering 0.3

Alcoholic drinks 0.3

Tobacco 0

Housing 0.3

Fuel & light 0.8 Household Goods -0.1

Household Services 0.2

Clothing & footwear -0.3

Personal goods & services 0.1

Motoring 0.8

Fares & other travel 0.1

Leisure goods -0.1

Leisure services 0.4

-0.5 -0.3 -0.1 0.1 0.3 0.5 0.7 0.9 1.1 1.3 Percentage points

Figure 3d shows the annual percentage contribution for each RPI(Y) group in June 2008 and Figure 3e shows the annual percentage change for each RPI(Y) group in June 2008.

Figure 3e: Percentage change in each RPI(Y) group June 2007 to June 2008

Food 10%

Catering 5%

Alcoholic drinks 6%

Tobacco 2%

Housing 2%

Fuel & light 22% Household Goods -2%

Household Services 2%

Clothing & footwear -6%

Personal goods & services 1%

Motoring 7%

Fares & other travel 3%

Leisure goods -2%

Leisure services 5%

-10% -5% 0% 5% 10% 15% 20% 25% Percentage

The Food, Fuel & light and Motoring groups were the major contributors to the overall annual rate of increase of RPI(Y) in Jersey in June 2008. Excluding the cost of house purchase means that the Housing group is not such a major a contributor to RPI(Y) as to the  RPI.  Excluding  the  effect  of  indirect  taxes,  Fuel  &  light  and  Food  saw  annual increases of 22% and 10%, respectively and the goods groups (Households goods, Leisure goods and Clothing & footwear) on average saw overall price reductions.

The annual change in RPI(Y) for Jersey in June 2008 was 3.9% compared to 4.9% in the UK.

The remainder of this report examines the 14 groups of the RPI separately, comparing Jersey, Guernsey and the UK in each case. Data are available to enable comparisons to be made at a section level for Jersey and the UK but not for Guernsey.

Group 1: Food (weight in Jersey RPI 10.4 out of 100)

Figure 4: Food group of the RPI in Jersey, Guernsey and the UK June 2000 to June 2008

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Over the past year, excluding the effect of GST in Jersey, Food prices have, on average, been rising at the same rate in Jersey and the UK (10%); a slightly greater rate of increase than that seen in Guernsey (7%), as shown in Figure 4. Including GST, Food prices in Jersey rose by 13% from June 2007 to 2008.

Figure  4a:  Jersey  and  UK  Food  group  annual  percentage  changes  per  quarter June 2001 to June 2008

14 12 10 8 6 4 2 0 -2 -4

Longer-term analysis shows that Food prices increased by 38% in Jersey, by 26% in the UK  and  by  22%  in  Guernsey  between  June  2000  and  June  2008.  This  long-term behaviour is apparent in Figure 4 and re-iterated in Figure 4a, which shows the annual percentage change of the Food group for Jersey and the UK for each quarter, since June 2001.

Food prices in Jersey were increasing at a faster rate than in the UK from 2001 to 2004, with  increases  of  14%  and  5.9%  and  6.6%,  in  Jersey,  the  UK  and  Guernsey, respectively. Since early 2005, the rates of increase in all three jurisdictions have been similar with the Food group increasing by 18% in Jersey, by 15% in the UK and by 12% in Guernsey since June 2006.

There  are  of  course  many  items  in  the  overall  Food  index,  and  Jersey  and  UK sub-indices for 8 of the 29 major sections of Food are presented in Figures 4b to 4i below. When viewing these graphs it is important to understand that special offers and seasonality can impact upon the prices of some foods. However, these Figures show that for most of the sections within the Food group, prices in Jersey have generally been rising at a faster rate than in the UK over the eight-year period.

During the year to June 2008 the average price of bread rose by 11% in Jersey and by 17% in the UK. Over the longer-term, prices increased by 44% and 49% respectively, between 2000 and 2008.

Figure 4b: Bread section of RPI

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Over the last eight years, prices of cereals (Figure 4c) and biscuits and cakes have risen more than twice as fast in Jersey compared with the UK. During the 12 months to June 2008 cereal prices rose by 22% in Jersey and by 13% in the UK. The price of biscuits and cakes increased at similar rates as cereals over the same period, by 22% and 11%, respectively.

Figure 4c: Cereals section of RPI

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Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08

Jersey saw a slightly higher rate of increase in meat prices (Figure 4d) over the past year, up by 15% on average compared to an increase of 12% in the UK. Within the meat sections, Jersey has generally seen greater rates of increase than that in the UK from 2000 to 2008. For example, the average price of pork rose by 70% in Jersey compared with a rise of 36% in the UK over the eight year period. The average cost of beef rose by about 39% in Jersey from 2000 to 2008, compared with a rise of 27% in the UK. The average price of lamb saw an increase of 43% in Jersey and a rise of 36% in the UK.

Figure 4d: Meat section of RPI

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In contrast, average poultry prices have risen by 10% over the period 2000 to 2008 in Jersey, whilst prices in the UK have increased at about 21%. Similarly, the UK saw a higher rate of increase in the average price of bacon (32%) than Jersey (21%) over the same period.

Figure 4e: Fresh fish section of RPI

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Fresh fish prices rose by 41% in Jersey compared to 18% in the UK between June 2000 and June 2008 (Figure 4e). In the 12 months to 2008 prices have risen in Jersey (up 4.5%) but fell in the UK, by 1.4%.

Within the dairy products, milk prices (Figure 4f) rose by 4.1% over the year to June 2008 in Jersey (largely due to the introduction of GST), whereas they rose by 19% in the UK. This continues the longer term behaviour, with prices rising by 54% since 2000 in the UK and by 11% in Jersey. The average price of milk, however, remains substantially higher in Jersey.

Figure 4f: Fresh milk section of RPI

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Other milk products (yoghurt, cream etc) have seen price increases in both Jersey and the UK lately (23% and 11% respectively) and over the last eight years prices of other milk products in Jersey have risen about 56% compared to 20% in the UK.

The price of oils and fats has risen by 39% in Jersey since 2000, compared with 31% in the UK. In the twelve months to June 2008 prices in Jersey rose by about a fifth (19%) whereas they rose by about a quarter (24%) in the UK. Long-term changes in the average price of butter have been similar in both jurisdictions, increasing by 39% in Jersey over the last eight years and by 37% in the UK over the same period. However, the rate of increase from 2007 to 2008 is higher in the UK (up 32%) than in Jersey (up 19%).

Figure 4g: Tea section of RPI

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Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08

The price of tea has increased more in the UK (6.8%) than in Jersey (3.4%) over the last year. Over the last eight years, tea prices have risen by about 18% in Jersey and by around 12% in the UK (Figure 4g). The price of coffee has seen similar long term behaviour with prices in Jersey increasing by 10% between 2000 and 2008 whereas the price of coffee in the UK rose by 8.3%.

Figure 4h: Fresh fruit section of RPI

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Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08

Since June 2000 fresh fruit prices (Figure 4h) have risen by 38% in Jersey compared to 22% in the UK. Over the past year, fresh fruit prices have increased by 7.4% in Jersey and by 8.6% in the UK.

Figure 4i: Fresh vegetables section of RPI

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In contrast, on average, fresh vegetable prices (Figure 4i) have increased more in the UK over the longer term (50% since 2000 compared to 41% in Jersey). However, vegetable prices have risen more in Jersey in the latest year (15% compared to 4.7% in the UK). Fresh (non-processed) potato prices have moved with some volatility in the UK, but  over  the  whole  period  both  jurisdictions  have  seen  prices  increase  by  nearly two-thirds (63%). In the latest year, average prices rose by about 12% in Jersey and by about 17% in the UK.

Where data are available, it is also informative to look at a direct comparison of average prices. These are presented for Jersey, Guernsey and the UK for various foods in tables 1 to 8 below. A longer run of data is shown in Annex A (Jersey and the UK) and Annex B (Jersey and Guernsey).

Meat and fish

Whilst there have been some fluctuations in prices, on average meat prices (for items for which  prices  are  available)  were  about  13%  higher  in  Jersey  than  in  the  UK  in June 2008, a slightly smaller difference than that seen in both 2006 and 2007. The only meat product (for which price quotes are available) cheaper in Jersey is fresh loin of lamb, which was only 1% below the average price in the UK.

Table 1: Average prices of matched meat & fish items in Jersey and the UK: June 20085

Fresh fish was on average almost a sixth (15%) more expensive in Jersey with white fish being just under a quarter more expensive in Jersey (22%) and salmon being 3% more expensive locally.

Table 2 demonstrates that, generally, average meat and fish prices were fairly similar in Jersey and Guernsey, except for chicken and haddock which were both more expensive in Jersey.

5.  Percentage  differences  between  jurisdictions,  shown  in  tables  and  annexes,  are  calculated  from un-rounded numbers and are then rounded to the nearest integer. Note that where the percentage difference (shown in the tables and annexes) is a positive value, the Jersey average price is greater than the other jurisdiction being compared.

6 Price quotes are for haddock in Jersey and for white fish fillets in the UK.

Table 2: Average prices of matched meat & fish items in Jersey and Guernsey: June 2008

Fruit and vegetables

No fresh vegetable (for which comparable price quotes were available) was found to be cheaper in Jersey than in the UK in June 2008. Overall, of all items priced, fresh vegetables were over a quarter more expensive (29%) than in the UK, a similar overall difference to that seen in 2007. The majority of priced items saw a larger price gap between June 2007 and 2008; for example the price of mushrooms was 42% higher in Jersey than the UK in 2007 but was 60% higher in 2008. In contrast, the price gap between Jersey and the UK for potatoes and onions narrowed slightly over the same period.

Table 3: Average prices of matched fruit and vegetables items in Jersey and the UK: June 2008

Overall, average fruit prices were also over a quarter (27%) more expensive in Jersey than in the UK, with grapes and avocados being the only items (for which price quotes are available) that were cheaper to purchase locally. Again, the price gap has increased slightly for the majority of priced items from 2007 to 2008 compared with 2006 to 2007.

Using  the  small  amount  of  matched item quotes available, table 4 shows that the average price of fresh vegetables is similar in both Jersey and Guernsey, with prices overall being just 6% higher in Jersey in June 2008. Similarly, fresh fruit was about 7% higher in Jersey, with no items (for which price quotes are available) being cheaper to purchase locally.

Table 4: Average prices of matched Fruit and vegetables items in Jersey and Guernsey: June 2008

Dairy produce

Most dairy products continue to be significantly more expensive in Jersey than in the UK. A pint of milk is on average 13 pence more (29%), with butter around 10% more and medium sized eggs about 12% more costly in Jersey.

Table 5: Average prices of matched dairy items in Jersey and the UK: June 2008

Milk, butter and eggs were also more expensive to purchase in Jersey than in Guernsey in June 2008, with cheddar cheese being cheaper to buy locally.

Table 6: Average prices of matched dairy items in Jersey and Guernsey: June 2008

Bread, other foods and soft drinks

On average, the other foods for which comparable prices are available are generally more expensive to purchase in Jersey than in the UK.

Table 7: Average prices of matched other food items in Jersey and the UK: June 2008

Table 8: Average prices of matched other food items in Jersey and Guernsey: June 2008

As table 8 shows, average prices for the other food items for which comparable prices are available are similar, overall, in both Jersey and Guernsey, except for flour.

Group 2: Catering (weight in Jersey RPI 4.3 out of 100)

Figure 5: Catering group of the RPI in Jersey, Guernsey and the UK June 2000 to June 2008

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Despite differences in the rate of increase of food items, overall the rate of price change for catering has been similar in all three jurisdictions (Figure 5). In the eight years to June 2008 catering prices have risen by 36% in Jersey, by 32% in Guernsey and by 30% in the UK. In the most recent 12 month period the price increases were higher in Jersey at 8.5% (which includes the effect of the introduction of GST) compared to 4.3% in the UK and 2.1% in Guernsey.

Group 3: Alcoholic drinks (weight in Jersey RPI 5.8 out of 100)

Over the last 12 months, the rate of price change for Alcoholic drinks increased in each jurisdiction, by 8.8% in Jersey, 11.4% in Guernsey and by 4.5% in the UK. Over the last eight  years,  overall  the  average  price  of  alcoholic  drinks  has  increased  faster  in Guernsey than in Jersey and the UK (50%, 43% and 22%, respectively).

The  level  of  imposed  taxes  (impôts  and  excise  rates)  on  alcoholic  drinks  in  each jurisdiction has a large impact on this group of the RPI. For example, the impact of increases in impôts is clearly visible in the alcoholic drink component of the Jersey RPI in Figure 6; the stepped change each March reflects the effect of the impôt increases which come into effect in the January of each year7.

Figure 6: Alcoholic drinks group of the RPI in Jersey, Guernsey and the UK June 2000 to June 2008

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Table 9: Impôts and Excise duties on alcohol in pence

1. In the UK VAT is applied to these items at 17.5%.
2. In Jersey GST is applied to these items at 3%.
3. ABV (alcohol by volume) is the alcoholic strength.

7 Impôts on alcohol were not changed in January 2005 and as such the impôt component of the cost of alcohol was the same in March 2005 as March 2004. As a result, there was no step change and in the absence of price movements for other reasons the index would have seen no change.

Excise duties (as they are known in the UK) have also been increasing in the UK since 2000 but at a lower overall rate than Jersey. For example, from 2000 to 2008 impôts on beer  have  increased  from  12p/pint  in  2000  to  27p/pint  in  Jersey,  from  18p/pint  to 32p/pint in Guernsey whilst UK duties increased from 27p/pint to 34p/pint over the same period.

Broadly speaking, tax changes (excluding GST) have accounted for about a sixth (15%) of the price increase seen in Jersey for beer between 2000 and 2008, with excise duty increases (excluding VAT) accounting for about 11% of the UK increase.

As table 9 shows, impôts on beer and lager increased by 1p/pint between 2007 and 2008 in Jersey, whilst those on whisky increased by 34p/litre over the same period. In the UK both beer and lager duties increased by 3p/pint, whilst duty on whisky increased by 72p/litre over the same period. Following increases of 5p/pint on beer and lager, and 53p/litre on whisky between 2006 and 2007, Guernsey duties remained unchanged between 2007 and 2008.

Table 10: Average prices of matched alcoholic drinks in Jersey and the UK: June 2008

Actual prices of alcoholic drinks in Jersey were above those in the UK (table 10). Furthermore, as table 11 shows, average prices before the addition of duties were significantly higher in Jersey than the UK.

Table 11: Average pre tax prices of matched alcoholic drinks in Jersey and the UK: June 2008

Actual prices of alcoholic drinks were similar, on average, in both Jersey and Guernsey, although  the  pre-tax  prices  of  bitter,  larger  and  whisky  were  all  slightly  higher  in Guernsey than in Jersey.

Table 12: Average prices of matched alcoholic drinks in Jersey and Guernsey: June 2008

Table 13: Average pre tax prices of matched alcoholic drinks in Jersey and Guernsey: June 2008

Group 4: Tobacco (weight in Jersey RPI 1.6 out of 100)

Figure 7: Tobacco group of the RPI in Jersey, Guernsey and the UK June 2000 to June 2008

200

180

160

140

120

Jersey 100 UK

Guernsey

80

Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08

The impact of increases in duties is also clearly visible in Figure 7 which shows the tobacco element of the Jersey, Guernsey and UK RPIs. In the eight years from June 2000 tobacco prices in Jersey have increased by 85%, compared with an increase of 68% in Guernsey and 39% in the UK. In the past 12 months, Jersey prices increased by  6.8% (which includes the effect of GST) compared to a 4.4% increase in Guernsey and a rise in the UK of 4.5%.

Table 14: Impôts and Excise duties on tobacco products in pence

Note: VAT is applied at 17.5% in the UK whereas GST is applied at 3% in Jersey.

Impôts on cigarettes have more than doubled in Jersey between 2000 and 2008, from £1.40 to £2.97 per packet, whilst over the same period duty in Guernsey almost doubled from £1.53 to £2.57. In the UK, excise duties have increased by 74 pence per packet over the past eight years (Table 14). Overall, impôts (and GST in Jersey) account for around 60% of the total price in both Jersey and Guernsey, whilst duty and VAT make up about 80% of the total UK price.

The  price  differential  between  Jersey  and  the  UK  on  a  pack  of  20  cigarettes  has narrowed from £1.15 in June 2000 to 17 pence in June 2008 (Table 15) and as table 16 shows, in June 2008, the pre-tax price of cigarettes in Jersey was about 80% more expensive than that in the UK, £2.06 in Jersey compared with £1.13 in the UK.

Table 15: Average prices of matched tobacco products in Jersey and the UK: June 2008

Table 16: Average pre tax prices of matched tobacco products in Jersey and the UK: June 2008

The average price of cigarettes in Jersey is about a sixth higher than in Guernsey (table 17). However, the pre tax prices are the same in both jurisdictions, at £2.06 per packet (table 18).

Table 17: Average prices of matched tobacco products in Jersey and Guernsey: June 2008

Table 18: Average pre tax prices of matched tobacco products in Jersey and Guernsey: June 2008

Group 5: Housing (weight in Jersey RPI 21.6 out of 100)

Figure 8: Housing group of the RPI in Jersey, Guernsey and the UK June 2000 to June 2008

180

160

140

120

100 Jersey

UK Guernsey

80

Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08

The Housing group has the largest group weight in the Jersey RPI, accounting for more than a fifth of the overall index. The group itself consists not only of house purchase costs (the interest paid on mortgages) but also rents, Parish rates, water rates, repairs and maintenance and DIY materials.

Overall the rate of price increase in the Housing group (Figure 8) has been very similar in Jersey, Guernsey and the UK over the past eight years (increases of around 61%, 69% and 58%, respectively). This reflects the fact that home purchase costs (which is the  largest  element  in  the  group)  has  increased  by  a  similar  amount  in  all  of  the jurisdictions. In the year to June 2008, Jersey saw an increase of 3.5% in the overall Housing group whereas Guernsey saw a rise of 4.7% and the UK an increase of 3.4%.

The price movements of individual elements within the Housing group are shown in Figures 8a to 8d, for Jersey and the UK.

Rental costs (Figure 8a) have risen about 1½ times faster in Jersey than in the UK over the past eight years, (36% compared to 26% in the UK). This behaviour reflects the higher overall rate of increase in the Jersey RPI compared to the UK over the same period (39% compared to 27%) since that index is often used to increase rental costs  each year. More recently, over the last 12 months, the increase in rental costs has been higher in the UK, rising by 3.8% compared to 1.0% in Jersey.

Figure 8a: Rent section of RPI

160 140 120

100 80 60 40 20

0

Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08

Figure 8b: Housing purchase section of RPI

210

180

150

120

90

60

30 Jersey

UK

0

Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08

Between June 2007 and June 2008 Jersey Parish rates decreased by 1.5% on average, whereas UK council taxes saw an average increase of 3.6% over the same period. Overall, rates have risen faster in the UK than in Jersey since June 2000 (60% and 28% respectively). Rates increases typically occur in September in Jersey and March in the UK; such timing differences emphasise the importance of using annual rather than quarterly comparisons when looking at prices.

Water rates have risen by a similar amount in Jersey (5.4% including the effect of GST) and in the UK (6.5%) over the last 12 months. Since June 2000, Jersey water rates have

increased by about a third (33%) compared to over half (56%) in the UK over the same period.

Another element of the housing group is DIY materials. Price s have risen by 19% in Jersey since June 2000 whereas the UK saw an increase of 12%. Over the year to June 2008 prices rose by 4.4% in both jurisdictions.

Figure 8c: Water rates section of RPI

160

140

120

100

Jersey

UK 80

Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08

Figure 8d: DIY section of RPI

125 120 115 110 105 100

95 Jersey

UK

90

Group 6: Fuel and light (weight in Jersey RPI 3.0 out of 100)

The Fuel and light group covers fuels used at home i.e. coal, oil, gas and electricity. Motor fuels are included within the Motoring group. Overall price changes in Jersey, Guernsey and the UK have moved broadly in phase over the past eight years; however, there are some important differences which reflect the different proportions of fuels used in the Channel Islands and in the UK.

In the Jersey RPI, heating oil accounts for about a third of the Fuel and light group and gas about a twentieth; in the UK gas accounts for about half of the group and oil about a twentieth. Electricity accounts for about three-fifths of the group in Jersey and about half in the UK. These proportions mean that the Jersey RPI is more susceptible to short term changes in the price of oil, which tends to be quite volatile. Fuel proportions in Guernsey are similar to those for Jersey.

Changes in the price of oil are evident in Figure 9, with the sharp fall in December 2001 and the rise and fall in mid-2003 reflecting large changes in global oil prices. Oil prices have risen since 2004, and since oil and gas prices are linked over the longer term, increases in oil prices have led to increases in gas prices, which has been particularly pertinent for the UK.

 Figure 9: Fuel and light group of the RPI in Jersey, Guernsey and the UK June 2000 to June 2008

200 180 160 140 120

Jersey 100 UK

Guernsey

80

Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08

Over the eight years to June 2008, energy prices rose by 97% in Jersey, 77% in Guernsey and by about 98% in the UK.

With the decrease in oil-fired electricity generation seen recently in Jersey, electricity prices became more insulated from increases in oil prices for a period but more recently, as the price of electricity increased throughout Europe, prices have risen in Jersey as well. Electricity prices remained unchanged between October 2000 and January 2005, however from January 2005 to January 2006, prices for all consumers rose by about  10%, followed by a 19% increase from January 2006 to January 2007. There were no price increases in January 2008.

In the last 12 months the overall change in energy prices has been higher in Jersey (26%) than in Guernsey (18%) and in the UK (15%).

Group 7: Household goods (weight in Jersey RPI 5.9 out of 100)

The  Household  goods  group  is  quite  a  wide-ranging  group  covering  furniture,  soft furnishings (duvets, carpets etc), electrical appliances, kitchen equipment, everyday household items (e.g. washing-up liquid, pens, etc) and pet food. However, despite the wide nature of the goods involved (or possibly because price rises for one type of product may be cancelled out by price falls for another product) prices in this group have been substantially flat (Figure 10) in Jersey over the past eight years, increasing by just 3%. Price s in the UK and Guernsey however rose by 15% and 12% respectively, over the same period.

Since 2005, the Household goods group in Jersey has been on a downward trend, with the slight increase of 0.7% seen in the year to June 2008 being mostly due to the effect of GST. From June 2007 to June 2008 the UK saw an increase of 3.7% and Guernsey saw an increase of 5.6%.

Figure 10: Household goods group of the RPI in Jersey, Guernsey and the UK June 2000 to June 2008

120 110 100 90

80

Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08

Group 8: Household services (weight in Jersey RPI 9.0 out of 100)

The Household services group includes postage, telephone charges, domestic services (such as dry-cleaning and child-minding) and fees and subscriptions. In the year to June 2008, Jersey saw an increase of 3.6% whereas the UK saw an increase of 4.5% and Guernsey an increase of 3.5%. Overall prices in this group have increased more in Jersey and Guernsey than the UK over the last eight years (40%, 39% and 30%, respectively).

Figure 11: Household services group of the RPI in Jersey, Guernsey and the UK June 2000 to June 2008

150

140

130

120

110

100

Jersey 90 UK

Guernsey

80

Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08

Since June 2000 postal costs have increased slightly more in Jersey (48%) than in the UK (44%). However, from June 2007 to June 2008 postal costs remained unchanged in Jersey, whereas prices increased by about 7% in the UK. This narrowing of the price gap between the two jurisdictions can be seen in Figure 11a.

Figure 11a: Postal charges section of the RPI

160 140 120

100 80 60 40

Jersey 20

UK

0

Figure 11b: Telephone charges section of the RPI

140

120

100

80

60

40

20 Jersey

UK

0

Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08

Both jurisdictions have seen decreases in telephone charges over the eight-year period (a 5% decrease in Jersey and a 12% decrease in the UK), although as Figure 11b shows the profiles of each jurisdiction are quite different. Until December 2002 prices in Jersey were increasing, but then started to fall. In the UK, prices initially fell from 2000 and then levelled. Most recently Jersey has seen a slight increase of 0.8% whereas prices have fallen by 0.4% in the UK.

Domestic services (which include childcare, home-help etc) have seen similar price increases of about a half (47% in Jersey and 51% in the UK) over the last eight years. More recently Jersey has seen an annual increase of 3.6% whilst the UK has seen an increase of 4.8%.

Group 9: Clothing and footwear (weight in Jersey RPI 4.5 out of 100)

Figure 12: Clothing group of the RPI in Jersey, Guernsey and the UK June 2000 to June 2008

120 100 80 60

40 20

0

Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08

The average price of clothes and shoes has been on a downward trend in all three jurisdictions over the past eight years, with Jersey prices decreasing by 17%, Guernsey by 19% and the UK by 21%.

In the most recent 12-month period, average prices in Jersey, Guernsey and the UK fell, by 4.0%, 5.4% and 4.4%, respectively.

Group 10: Personal goods & services (weight in Jersey RPI 6.5 out of 100)

Figure 13: Personal goods & services group of the RPI in Jersey, Guernsey and UK June 2000 to June 2008

140 130 120 110 100

Jersey 90 UK

Guernsey

80

Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08

The  Personal  goods  and  services  group  comprises  goods  such  as  chemist  goods (ranging from painkillers to shampoo and nappies) bags, jewellery and watches, and services (such as hairdressing, medical consultations and eye tests).

Overall, prices for these items in Jersey have risen by about a third (33%) over the past eight years compared to 30% in Guernsey and about a fifth (20%) in the UK. In the 12 months to June 2008 Jersey prices have risen by 2.9% compared to a rise of 3.2% in both Guernsey and the UK (Figure 13).

Personal services (Figure 13a) have experienced price increases at a rate of 60% in Jersey and at a rate of 46% in the UK between 2000 and 2008. In the twelve months to 2008 costs rose by 8.3% in Jersey compared to 4.8% in the UK.

Figure 13a: Personal services section of the RPI

170 155 140 125 110

95 Jersey

UK

80

Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08

Figure 13b: Chemist goods section of the RPI

120

90

Jersey UK

60

Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08

The UK has seen an increase of 4.0% in chemist goods over the eight years from June 2000 whereas Jersey prices have increased by 11% over the same period. Within the last year, the average price for chemist goods has decreased by 5% in Jersey compared to an increase of 2% in the UK (Figure 13b).

Group 11: Motoring expenditure (weight in Jersey RPI 11.1 out of 100)8

The Motoring expenditure group (Figure 14) has the second largest weight in the Jersey RPI after Housing and therefore can have a major influence on the RPI. As such the fact that Motoring costs have increased by 42% in Jersey and by 30% in Guernsey but by only 10% in the UK between 2000 and 2008 will be an important factor in the difference in growth between the respective aggregate RPIs.

Figure 14: Motoring group of the RPI in Jersey, Guernsey and the UK June 2000 to June 2008

150 140 130 120 110

100

Jersey

90 UK

Guernsey

80

Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08

The  largest  weight  within  the  group  is  given  to  the  costs  of  purchasing  vehicles. Throughout the period 2000 to 2002 the element of the RPI covering the cost of vehicles moved by very similar amounts in Jersey and the UK. In January 2003 VRD9 was introduced in Jersey, adding to the cost of new vehicles. This tax was abolished in 2008 and was effectively replaced with GST10. However, as Figure 14a shows, even when tax is removed from the Jersey cost of purchase, Jersey prices increased considerably more than those in the UK. Overall vehicle costs have fallen in the UK by 23% but have risen in Jersey by 16% over the last eight years. Between June 2007 and June 2008 the cost of vehicles fell by 5.3% in the UK but increased by 3.9% in Jersey.

8 Following the latest review of the RPI, parking fees were moved from the Motoring group and are now included in Fares and other travel - see Statistics Unit report Retail Price s Index: Review of the basket of goods and services 2007

9 Vehicle Registration Duty 10 Goods and Services Tax

Figure 14a: Motor vehicles section of the RPI

140

120

100

80

60

40 Jersey

Jersey excluding VRD / GST 20

UK

0

Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08

Another major element of Motoring costs is motor fuel (constituting the bulk of the petrol and oil section of the RPI). However, some care is needed in analysing these costs in the period 2000 to 2008. In 2000 petrol prices in the UK had reached what was then an all-time peak, as global oil prices rose and successive governments had increased the excise duty on motor fuels. Since then duty remained essentially unchanged in the UK up until 2006, whereas impôts have risen in Jersey. As a result, the petrol and oil component of the Jersey RPI has seen an increase almost double that of the UK's (82% and 44%, respectively) since June 2000.

Figure 14b: Petrol and oil section of the RPI

200 180 160 140 120 100

80 Jersey

UK

60

This year, there was a duty increase in the UK on both unleaded petrol and diesel fuel to 52p/litre.  In  Jersey,  impôts  also  increased  on  both  fuel  types,  to  41p/litre.  This  is reflected in the 12 months to June 2008, with motor fuel prices rising by about a quarter in both jurisdictions (26% in Jersey and 24% in the UK). Guernsey also increased the tax on petrol and diesel from 2007 to 2008 by 14p/litre to 29p/litre.

Table 19: Taxes levied on motor fuels (pence per litre)

The UK duty on petrol shown for 2000 is that on unleaded petrol; subsequent years are for ULSP. ULSP = Ultra low sulphur petrol; ULSD = Ultra low sulphur diesel.

The  difference  between  the  retail  prices  in  Jersey  and  UK  of  around  24p/litre  in June 2000 (see Annex Table A5) had reduced to about 9p/litre for premium unleaded fuel and about 8p/litre for diesel by June 2008 (Table 20).

Table 20: Average prices of motor fuels in Jersey and the UK: June 2008

The average pre-tax price of unleaded petrol in Jersey (65p/litre) is over a third (37%) higher than in the UK (48p/litre) whereas the average pre-tax price of diesel is about a third (33%) higher in Jersey (78p/litre) than in the UK (59p/litre).

Table 21: Average pre tax prices of motor fuels in Jersey and the UK: June 2008

As table 22 shows, the average price of motor fuels was greater in Jersey than in Guernsey in June 2008. However, as shown in table 23, the pre-tax average price of unleaded petrol is 4p cheaper in Jersey (65p/litre) than in Guernsey (69p/litre) and the pre-tax  average  price  of  diesel  is  the  same  in  both  jurisdictions  (78p/litre).

Table 22: Average prices of motor fuels in Jersey and Guernsey: June 2008

Table 23: Average pre tax prices of motor fuels in Jersey and Guernsey: June 200811

Group 12: Fares and other travel costs (weight in Jersey RPI 2.7 out of 100)

Figure 15: Fares and travel group of the RPI in Jersey, Guernsey and the UK June 2000 to June 2008

180

155