Inflation Calculator | How it works | Calculator Caveats
The Inflation Calculator is designed for illustrative and general reference purposes only.
The calculations are approximate, and give a rough guide to the buying power of the pound for goods and services purchased in the UK. They do not reflect changes in the buying power of the pound abroad – what you can buy with a pound in terms of other currencies. These values are influenced by exchange rates.
In order to make comparisons possible over long periods of time, the Calculator uses the composite price index published by the Office for National Statistics. Since there is no single price index available all the way back to 1750, the composite index is produced by linking together prices data from several different published sources – both official and unofficial. For various reasons, the quality of these data decline further back in time.
How things have changed
Over long periods, the definitions of goods and services included in the price index have changed. For example, a family’s food and clothes today are very different to those of a typical family a hundred years ago: even a simple loaf of bread has changed over the last century.
And the way households spend their money has changed enormously. Around 60% of the family budget went on food in 1914. Nowadays this has fallen to only 11%. Changes in household spending reflect higher incomes and the wider range of goods and services available to buy today (e.g. DVDs, computers, music downloads). These new goods and services are included in today’s price index, but not in earlier versions.
Overall, these features of the data mean that comparisons of prices further back in time and over long periods are less accurate than comparisons over short periods in recent years.
From 1947, the data used in the composite index come from the well-known Retail Prices Index. Complete information on the index can be found in the article “Consumer price inflation since 1750”, published in Economic Trends, March, 2004.