Proposal for a Council Regulation (EC) laying down detailed rules for the implementation of Council Regulation (EC) No 2494/95 as regards minimum standards for the treatment of products in the Health, Education and Social Protection Sectors in the Harmonized Index of Consumer Prices
Date: 1999-07-22
Institutions: European Commission
Subjects: consumer price, economic convergence, harmonisation of prices, price index

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 22.07.1999
COM(1999) 377 final

99/0164 (CNB)

Proposal for a

COUNCIL REGULATION (EC)

laying down detailed rules for the implementation of Council Regulation (EC)
No 2494/95 as regards minimum standards for the treatment of products in the
Health, Education and Social Protection Sectors in the Harmonized Index of
Consumer Prices

(presented by the Commission)

EXPLANATORY MEMORANDUM

1.

2.

3.

4.

On 7 March 1997 Eurostat published the first set of Harmonized Indices of
Consumer Prices (HICPs) as required by Article 5(1) (b) of Council Regulation
(EC) No 2494/95. HICPs are designed for
international comparisons of
consumer price inflation. They form the basis of the Monetary Union Index of
Consumer Prices (MUICP) used by, among others, the European Central Bank
for the monitoring of inflation in the Economic and Monetary Union and the
assessment of inflation convergence.

Under framework Council Regulation (EC) No 2494/95, the Commission has so
far adopted four detailed Regulations establishing specific implementing
measures governing the production of the HICP. The first, Commission
Regulation (EC) No 1749/96 on initial implementing measures, covers six
technical areas:
initial coverage, newly significant goods and services,
for quality adjustment,
elementary aggregates, and minimum standards
sampling and prices. The second, Commission Regulation (EC) No 2214/96,
relates to the HICP and its sub-indices that are transmitted to and disseminated
by Eurostat. The third, Commission Regulation (EC) No 2454/97, defines
minimum standards for the quality of the weightings used to construct the
HICP. The fourth, Commission Regulation (EC) No 2646/98, defines minimum
standards for the treatment of tariffs in the HICP. Furthermore, under the same
framework Council Regulation two implementing Council Regulations have
amended Commission Regulation (EC) No 1749/96 in respect
to HICP
coverage. Council Regulation (EC) No 1687/98 extends the coverage of goods
and services, and Council Regulation (EC) No 1688/98 extends the geographic
and population coverage and gives the final definition of “Household final
monetary consumption expenditure”.

Commission Regulation (EC) No 1749/96 as amended by Council Regulation
(EC) No 1687/98, in particular Article 3 and Annex Ia thereof, lay down that
extended coverage in the health, education and social protection sectors shall be
implemented in December 1999 and take effect with the index for January 2000.
inclusion should be specified in
Thereby,
accordance with the procedure laid down in Article 14 of the framework
Council Regulation (EC) No 2494/95. The timetable of inclusion for hospital
services and social protection services provided within the home, retirement
homes and residences for the disabled should be specified in accordance with
the same procedure.

the methodological details of

This proposed Council Regulation defines the methodological details of
inclusion for products in the health, education and social protection sectors, i.e.
how such products should be treated in the HICP, and the timetable of inclusion
for the exceptions mentioned above.

2

5.

6.

7.

8.

9.

This proposed Regulation restates that
the purchaser prices of goods and
services in the health, education and social protection sectors to be used in the
in accordance with set standards(1) and ESA 1995, be the
HICP should,
amounts to be paid by consumers net of reimbursements. The HICP sub-indices
concerned should be calculated using a formula which is consistent with the
Laspeyres-type formula used for other sub-indices, i.e. they should reflect the
price change on the basis of the changed expenditure of maintaining the
consumption pattern of households and the composition of the consumer
population in the base or reference period.

In consistency with the Laspeyres principle and the relevant provisions of
Commission Regulation (EC) No 2646/98 on tariff prices, this draft Regulation
proposes more specifically that changes in purchaser prices which reflect
changes in the rules determining them should be shown as price changes in the
HICP and that changes in the purchaser prices resulting from changes in
purchasers’ incomes shall also be shown as price changes in the HICP.

the proposed Regulation makes expressly clear

However,
that during a
transition period, Member States may use procedures which differ from those
described just above on the condition that they will provide the Commission
(Eurostat) with a description of the procedures chosen before such procedures
are used. Member States should provide Eurostat on request with information
sufficient to assess the operation of these procedures. Eurostat intends to include
the result of this assessment in the report to be submitted by the Commission to
the Council as foreseen in Article 2 of Council Regulation (EC) No 1688/98.

The provisions of this Regulation shall be implemented by the Member States in
December 1999 and shall take effect with the index for January 2000, apart
from the following, which shall be implemented in December 2000 and shall
take effect with the index for January 2001:
a)

hospital services (COICOP/HICP 06.3);

b)

c)

social protection services provided within the home, such as home
cleaning, meals, transport for the disabled (part of COICOP/HICP 12.4.0);

retirement
COICOP/HICP 12.4.0).

homes,

residences

for

the

disabled

(part

of

As regards the definition and the treatment of prices, Article 4 ("Prices") in the
proposal, the vote at the Working Party was taken after discussion of the relative
merits attached to each of the alternative options worked out by the Task Force
on the “ treatment of the health, education and social protection sectors in the
HICP” and the WP itself.

10. The Working Party and its Task Forces have spent many hours in numerous
meetings over three years discussing the treatment of prices in the health,
education and social protection sectors. All available options were discussed to
a large extent at the March Working Party meeting. However, none except the
proposed one seemed likely to gain the support of a majority. The proposal has
obtained the agreement of almost all members of the HICP Working Party
including the main users, DG II and the ECB(2).

(1)
(2)

Commission Regulation (EC) No 1749/96 as amended by Council Regulation (EC) No 1687/98.
However, the ECB has not been formally consulted yet.

3

Proposal for a

COUNCIL REGULATION (EC)

laying down detailed rules for the implementation of Council Regulation (EC)
No 2494/95 as regards minimum standards for the treatment of products in the
Health, Education and Social Protection Sectors in the Harmonized Index of
Consumer Prices

(Text with EEA relevance)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community,

Having regard to Council Regulation (EC) No 2494/95 of 23 October 1995
concerning harmonized indices of consumer prices(3), and in particular Articles 4
and 5(3) thereof,

Having regard to the proposal from the Commission,

After consulting the European Central Bank(4),

(1) Whereas, by virtue of Article 5(1)(b) of Regulation (EC) No 2494/95, each
Member State is required to produce a Harmonized Index of Consumer Prices
(HICP) starting with the index for January 1997;

(2) Whereas Commission Regulation (EC) No 1749/96(5) as amended by Council
Regulations (EC) No 1687/98(6) and (EC) No 1688/98(7) defines the coverage
of the HICP as those goods and services which are included in household final
monetary consumption expenditure; whereas goods and services in the health,
education and social protection sectors are part of the coverage of the HICP;
whereas household final monetary consumption covers the expenditure incurred
by individuals living in institutional households;

(3)
(4)
(5)
(6)
(7)

OJ L 257, 27.10.1995, p. 1.
Opinion delivered on …
OJ L 229, 10.9.1996, p. 3.
OJ L 214, 31.7.1998, p. 12.
OJ L 214, 31.7.1998, p. 23.

4

(3) Whereas, by virtue of Commission Regulation (EC) No 1749/96, in particular
Article 3 and Annex Ia thereof, extended coverage in the health, education and
social protection sectors should be implemented in December 1999 and take
effect with the index for January 2000, whereby the methodological details of
inclusion should be specified in accordance with the procedure laid down in
Article 14 of the framework Council Regulation (EC) No 2494/95; whereas the
timetable of inclusion for hospital services and social protection services
provided within the home, retirement homes and residences for the disabled
should be specified in accordance with the same procedure;

(4) Whereas there is considerable scope for procedural differences in the treatment
of goods and services in the health, education and social protection sectors in
the HICP; whereas a harmonized methodology for such goods and services is
necessary to ensure that the resulting HICPs meet the comparability requirement
as laid down in Article 4 of Regulation (EC) No 2494/95;

(5) Whereas the treatment of goods and services in the health, education and social
protection sectors is consistent with the definitions laid down in the European
System of Accounts (ESA) 1995(8);

(6) Whereas the Statistical Programme Committee (SPC) has not delivered an
opinion within the time limit set by its chairman; whereas,
in this case,
following the procedure laid down in Article 14(2) of Regulation (EC)
No 2494/95, the Commission has to, without delay, submit to the Council a
proposal relating to the measures to be taken,

HAS ADOPTED THIS REGULATION:

Article 1

Aim

The aim of this Regulation is to set minimum standards for the treatment of goods and
services in the health, education and social protection sectors in the Harmonized
Indices of Consumer Prices (HICPs) in order to ensure that they are reliable and
the comparability requirements as laid down in Article 4 of
relevant and meet
Regulation (EC) No 2494/95.

(8)

Council Regulation (EC) No 2223/96 (OJ L 310, 13.10.1996).

5

1.

2.

3.

1.

2.

3.

Article 2

Definition

Reimbursements refer to payments to households by government units, social
security administrations or non-profit
serving households
(NPISHs), that are made as direct consequences of purchases of individually
specified goods and services, initially paid for by households.

institutions

Payments of claims to households by insurance companies do not constitute
reimbursements.

Other payments or rebates to households by government units, social security
administrations or non-profit institutions serving households (NPISHs) in the
form of assistance to reduce household expenditure, such as housing
allowances to tenants or payments due to sickness, disability, the care of
elderly relatives or scholarships to students, are considered as social benefits
in cash. They are treated as income transfers to households and do not
constitute reimbursements.

Article 3

Coverage

Goods and services in the health, education and social protection sectors on
which household final monetary consumption expenditure is incurred shall be
covered in the HICP and grouped in accordance with the COICOP/HICP as
laid down in Commission Regulation (EC) No 2214/96 of 20 November 1996
concerning harmonized indices of consumer prices:
transmission and
dissemination of sub-indices of the HICP(9).

All providers of goods and services in the health, education and social
protection sectors, such as government and private institutions, NPISHs or
private self-employed persons, shall be covered in the HICP independently of
their status. This excludes individuals or groups of individuals as producers of
goods and non-financial services exclusively for own final use.

In accordance with COICOP/HICP, Education (Division 10)
includes
education services only. If an all-inclusive price is charged for education
services in combination with educational materials or education support
services,
separated and allocated to the
COICOP/HICP classes concerned. Where such an all-inclusive price cannot be

components

shall be

its

(9)

OJ L 296, 21.11.1996, p. 8.

6

4.

5.

1.

separated into the prices of the components concerned, the all-inclusive price
shall be allocated to COICOP/HICP Division 10.

Borderline cases between education services at the pre-primary level and
child-minding social protection facilities, such as wet-nurses, crèches and
play-schools, shall be allocated to COICOP/HICP Division 10 if the child's
age of entry is not less than three years and the activities consist of organised
instruction in a school-type environment designed to bridge the gap between
the home and school atmosphere. If, on the other hand, the main objective is
not a pedagogical one, but to provide child-minding assistance and support,
the service concerned should be allocated to COICOP/HICP class 12.4.0.

in

hospitals,

Where
in
to
COICOP/HICP 06.3, make other goods or services available to in-patients on
a separate charge basis, the latter shall not be allocated to class 06.3.0, but to
the COICOP/HICP classes concerned.

addition

services

defined

basic

as

Article 4

Prices

The HICP sub-indices concerned shall be calculated using a formula which is
consistent with the Laspeyres-type formula used for other sub-indices. They
should reflect the price change on the basis of the changed expenditure of
maintaining the consumption pattern of households and the composition of the
consumer population in the base or reference period.

2.

(a)

The purchaser prices of goods and services in the health, education and
social protection sectors to be used in the HICP shall be the amounts to
be paid by consumers net of reimbursements.

(b)

(c)

(d)

Changes in purchaser prices which reflect changes in the rules
determining them shall be shown as price changes in the HICP.

Where purchaser prices are index-linked, changes resulting from
changes in the index shall be shown as price changes in the HICP.

Changes in the purchaser prices resulting from changes in purchasers’
incomes shall be shown as price changes in the HICP.

3.

4.

Where quality changes, prices should be treated according to the rules applied
in the context of specification changes, and in particular those regarding
quality adjustment pursuant to Article 5 of Commission Regulation (EC)
No 1749/96.

Where a good or service, in the education, health and social protection sectors,
has been made available to consumers free of charge and subsequently an
actual price is charged, the change from zero to an actual price, and vice versa,
shall be reflected in the HICP.

7

5.

6.

Where goods or services in the education, health and social protection sectors,
jointly provided with other goods and services, have been made available to
consumers free of charge and subsequently are charged for on a separate basis,
the change shall be reflected in the HICP.

Where relevant, the procedure provided for in Article 5 of Commission
Regulation (EC) No 2646/98(10) concerning tariffs shall apply mutatis
mutandis.

Article 5

Basic information

The basic information shall be all purchaser prices of goods and services in the health,
together with
education and social protection sectors and their components,
weightings which reflect the level, the timing and the structure of the consumption of
such goods or
services, according to the price-determining socio-economic
characteristics.

Article 6

Data sources

1.

2.

The HICP sub-indices concerned shall be computed by the Member States
from basic information as defined in Article 5.

The statistical units, such as government agencies, social administrations or
NPISHs, called upon by the Member States to cooperate in the collection or
provision of basic information are obliged to give honest and complete
information at
is requested and allow the organisations and
institutions responsible for compiling official statistics, on request, to obtain
information at the level of detail necessary to evaluate compliance with the
comparability requirements and the quality of the HICP sub-indices.

the time it

Article 7

Comparability

HICPs constructed following the procedures described in Articles 4 and 5 of this
Regulation or following other procedures which do not result in an index which
differs systematically by more than one tenth of one percentage point on average over
one year against
from an index compiled following those
procedures, shall be deemed comparable.

the previous year

(10)

JO L 335, 10.12.1998, p. 30.

8

Article 8

Quality control

1.

2.

Member States may use procedures which differ from those specified in
Articles 4 and 5 of this Regulation, on condition that
they provide the
Commission (Eurostat) with a description of the procedures chosen for the
treatment of goods and services in the health, education and social protection
sectors before such procedures are applied.

Member States shall provide the Commission (Eurostat), on request, with
sufficient information to assess the operation of the procedures laid down in
Articles 4 and 5 of this Regulation. The result of this assessment shall be
included in the report to be submitted by the Commission to the Council as
provided for in Article 2 of Council Regulation (EC) No 1688/98.

Article 9

Implementation

The provisions of this Regulation shall be implemented by the Member States in
December 1999 and shall take effect with the index for January 2000, apart from the
following, which shall be implemented in December 2000 and shall take effect with
the index for January 2001:

a)

b)

c)

hospital services (COICOP/HICP 06.3);

social protection services provided within the home, such as home cleaning,
meals, transport for the disabled (part of COICOP/HICP 12.4.0);

retirement
COICOP/HICP 12.4.0).

homes,

residences

for

the

disabled

(part

of

Article 10

Entry into force

This Regulation shall enter into force on the twentieth day following its publication in
the Official Journal of the European Communities.

This Regulation shall be binding in its entirety and directly applicable in all Member
States.

Done at Brussels,

For the Council

The President

9

FINANCIAL STATEMENT

1.

TITLE OF OPERATION

laying down detailed rules

Council Regulation (EC)
the
implementation of Council Regulation (EC) No 2494/95 as regards
minimum standards for the Treatment of Products in the Health,
Education and Social Protection Sectors in the Harmonized Index of
Consumer Prices

for

2.

BUDGET HEADING INVOLVED

Article B5-6000.

3.

LEGAL BASIS

Council Regulation (EC) No 2494/95.

4.

DESCRIPTION OF OPERATION

4.1 General objective

The aim of the Council Regulation is to expedite the programme of
work leading to Harmonized Indices of Consumer Prices (HICPs) in
line with the requirements of the Treaty establishing the European
Community. HICPs form the basis of the Monetary Union Index of
the European
Consumer Prices (MUICP) used by, among others,
Central Bank for the monitoring of inflation in the Economic and
Monetary Union. Council Regulation (EC) No 2494/95 provides the
framework for detailed Commission Regulations requiring Member
States to produce HICPs according to concepts methods and practices
which have been proposed by the Working Party(11) on CPI
Harmonization and approved by the Statistical Programme Committee
following the Regulatory Committee procedure.

Commission Regulation (EC) No 1749/96 of 9 September 1996 gives
measures on initial coverage, treatment of newly significant goods and
services, minimum standards for procedures of quality adjustment,
minimum standards for prices, price indices for elementary aggregates,
and minimum standards for sampling.

Commission Regulation (EC) No 2214/96 of 20 November 1996
defines the sub-indices of the HICPs which are produced, transmitted
and disseminated each month starting with the index for January 1997.

(11)

Group of experts.

10

Commission Regulation (EC) No 2454/97 of 10 December 1997
defines minimum standards for the quality of the weightings used in
the computation of the HICP.

Council Regulation (EC) No 1687/98 of 20 July 1998 amends
Commission Regulation (EC) No 1749/96 with respect to the coverage
of goods and services of HICPs starting from December 1999.

Council Regulation (EC) No 1688/98 of 20 July 1998 amends
Commission Regulation (EC) No 1749/96 with respect
to the
geographic and population coverage of the Harmonized Index of
Consumer Prices starting from December 1999.

The Commission Decision of 9 September 1996 [ref. No C(96)2452]
provided for the funding of part of the additional costs to Member
States due to implementing the above mentioned standards.

Commission Regulation (EC) No 2646/98 of 9 December 1998 lays
down detailed rules for the implementation of Council Regulation (EC)
No 2494/95 as regards minimum standards for the treatment of tariffs
in the Harmonized Index of Consumer Prices.

effect with the

Commission Regulation (EC) No 1749/96 as amended by Council
Regulation (EC) No 1687/98, in particular Article 3 and Annex Ia
thereof, lay down that extended coverage in the health, education and
social protection sectors shall be implemented in December 1999 and
the
take
methodological details of inclusion should be specified in accordance
with the procedure laid down in Article 14 of the framework Council
Regulation (EC) No 2494/95. The timetable of inclusion for hospital
services and social protection services provided within the home,
retirement homes and residences for the disabled should be specified in
accordance with the same procedure.

January 2000. Thereby,

index for

This proposed Council Regulation defines the methodological details
of inclusion for products in the health, education and social protection
sectors, i.e. how such products should be treated in the HICP, and the
timetable of inclusion for the exceptions mentioned above.

In parallel, consultation is proceeding on a draft Commission
Regulation amending Commission Regulation (EC) No 2214/96,
concerning the sub-indices of the Harmonized Index of Consumer
Prices. Furthermore a draft Commission Regulation laying down
detailed rules for the treatment of insurance in the Harmonized Index
of Consumer Prices and modifying Commission Regulation (EC)
No 2214/96 is about to be sent to the Secretariat General to initiate the
written procedure.

11

4.2 Period covered and arrangements for renewal

The framework Council Regulation requires an implementation in
stages of progressive harmonization. The first,
in February 1996,
involved minimal resources and was based almost entirely on existing
Consumer Price Indices (CPIs). The second, in January 1997, involved
substantial resources. The third, in December 1999, will also involve
substantial resources. The inclusion of health, education and social
protection services is part of
this third stage of harmonization
following Commission Regulation (EC) No 1749/96 as amended by the
two Council Regulations (EC) No 1687/98 and (EC) No 1688/98
concerning extended coverage. The financial statement of those two
amending Regulations already dealt with the financial
impact of
extended coverage in general. This proposed Council Regulation
defines the methodological details of inclusion for products in the
health, education and social protection sectors, i.e. how such products
should be treated in the HICP, and the timetable of inclusion for the
exceptions mentioned above.

5.

CLASSIFICATION OF EXPENDITURE OR REVENUE

DNO: CD.

6.

TYPE OF EXPENDITURE OR REVENUE

Subvention co-financing (66.6%) with national administrations;

Administrative expenditure - see paragraph 10.

7.

FINANCIAL IMPACT

7.1 Method of calculating total cost of operation (relation between

individual and total costs)

The proposed Regulation is necessary to achieve comparable measures
of inflation, which form the basis of the Monetary Union index of
consumer prices (MUICP) for monitoring inflation in the Economic
and Monetary Union from January 1999. Some Member States are
better equipped to handle the necessary system changes than others do.

The financial impact of the third stage that is to be implemented from
December 1999 is almost exclusively due to the extension of product,
population and geographic coverage in general. This proposed Council
Regulation deals only with the treatment of prices for products in the
health, education and social protection sectors. Although some
Member States have indicated that
they might have to deal with
additional costs as a consequence of the proposed treatment, there is no
evidence for a significant financial impact due to the specific treatment
proposed. In accordance with Article 13 of Council Regulation (EC)

12

No 2494/95 Member States would not be obliged to implement the
draft Regulation unless the Commission (Eurostat) bears two-thirds of
the additional costs until the end of the second year of implementation
of the measures. However, the order of the total cost for extending the
HICP coverage as presented in the financial statements of Council
(EC) No 1687/98 and (EC) No 1688/98,
Regulations
about
1.4 million
, should be sufficient to cover the additional cost of the
proposed operation.

€

7.2

Itemised breakdown of cost

Member States may produce a breakdown of the costs of their action as
part of the process of allocating available budget resource.

8.

FRAUD PREVENTION MEASURES

Specific arrangements with Member States will be set in place to ensure that
appropriate actions are undertaken and properly accounted for.

9.

ELEMENTS OF COST-EFFECTIVENESS ANALYSIS

9.1 Specific and quantified objectives; target population

Specific objectives:

Improved and comparable indices of consumer prices.

Target population:

Users of price indices in Member States will benefit from improved
measures. HICPs form the basis of the Monetary Union Index of
Consumer Prices (MUICP) used by, among others,
the European
Central Bank for the monitoring of inflation in the Economic and
Monetary Union.

9.2 Grounds for the operation

The framework Council Regulation (EC) No 2494/95 should lead to
improved reliability, relevance and international comparability of the
consumer price indices of Member States. It should also lead to a
sharing of expertise on the compilation of consumer price indices
between Member States.

Main factor of uncertainty:

The framework Council Regulation provides only a framework within
which many technical details must be resolved in collaboration with
Member States.

13

9.3 Monitoring and evaluation of the operation

The implementing measures provide for extensive monitoring and the
development of appropriate performance indicators by means of
questionnaires and Eurostat audit missions (see below for costs).

The Council Regulation (EC) No 2494/95 provides for a review by
November 1997 and again by November 1999. The 1997 review was
submitted to the Council of Ministers as document COM(1998)104
final. Council Regulation (EC) No 1687/98 provides for another review
to the Council which shall assess the operation of especially the
household final monetary consumption concept in relation to relevant
alternative concepts.

10.

ADMINISTRATIVE EXPENDITURE (SECTION III, PART A OF THE BUDGET)

Actual mobilisation of the necessary administrative resources will depend on
the Commission’s annual decision on the allocation of resources, taking into
the number of staff and additional amounts authorised by the
account
budgetary authority.

10.1 Effect on the number of posts

Type of post

Staff to be assigned to
managing the operation

Permanent
posts

Temporary
posts

Source

Duration

Additional
resources

3 years

Existing
resources in
the DG or
department
concerned

Officials or
temporary staff

A
B
C

Other resources
E.N.D. (A-7003)

Total

3½

2

1

1

7½

3½

2

1

1

7½

The annual cost of existing resources is:

Officials (*)

E.N.D (A-1178)

=

=

108.000 x 6½ x 3 years

= 2.106.000 Euro

37.000 x 3 years

= 111.000 Euro

(*)

By using existing resources assigned to manage the operation (for officials the
calculation is based on titles A-1, A-2, A-4, A-5 and A-7)

14

10.2 Overall financial impact of additional human resources

None.

10.3 Increase in other administrative expenditure as a result of the

operation

Budget heading

Amounts

Method of calculation

A-7031 Working
groups of the Statistical
Programme Committee

A-701 Mission
expenses for audit
missions to Member
States

72.000

95.000

Total

167.000

€

€

€

€

4 meetings at 6 K
(· 3 years)

covering delegates expenses

Audit missions to 10 Member States for three days
at 120

per day + fares (· 3 years)

€

The increase in “other administrative expenditure” is a result of the
harmonization as such and has been also treated in the financial
statements for Council Regulations (EC) No 1687/98 and (EC)
No 1688/98.

15

THE IMPACT OF THE PROPOSAL ON BUSINESS
WITH SPECIAL REFERENCE TO SMALL AND MEDIUM SIZED
ENTERPRISES (SMES)

TITLE OF PROPOSAL:

for Council Regulation (EC)

Proposal
the
implementation of Council Regulation (EC) No 2494/95 as regards minimum
standards for the Treatment of Products in the Health, Education and Social
Protection Sectors in the Harmonized Index of Consumer Prices

laying down detailed rules

for

DOCUMENT REFERENCE NUMBER: 99009

THE PROPOSAL:

1. Taking account of the principle of subsidiarity why is Community legislation

necessary in this area and what are the main aims?

The aim is to expedite a programme of work leading to Harmonized Indices of
Consumer Prices (HICPs) in line with the requirements of the Treaty establishing
the European Community. HICPs are designed for international comparisons of
consumer price inflation. They form the basis of the Monetary Union Index of
Consumer Prices (MUICP) to be used by, among others, the European Central
Bank for the monitoring of inflation in the Economic and Monetary Union and
the assessment of inflation convergence.

implementing measures are necessary for

Council Regulation (EC) No 2494/95 provides the framework for detailed
Commission Regulations requiring Member States to produce HICPs according
concepts methods and practices which have been proposed by the HICP Working
Party(12) and approved by the Statistical Programme Committee following the
Regulatory Committee procedure. In accordance with Article 5(3) of the HICP
Council Regulation,
ensuring
comparability of HICPs and for maintaining and improving their reliability. So
far the Commission has adopted four detailed Regulations establishing specific
statistical standards governing the production of the HICP. The first, Commission
Regulation (EC) 1749/96 on initial implementing measures, covers six technical
areas:
initial coverage, newly significant goods and services, elementary
aggregates, and minimum standards for quality adjustment, sampling and prices.
The second, Commission Regulation (EC) No 2214/96, relates to the HICP and
its sub-indices that will be transmitted to and disseminated by Eurostat. The third,
Commission Regulation (EC) No 2454/97, defines minimum standards for the
quality of the weights used to construct the HICP. The fourth, Commission
Regulation (EC) No 2646/98, defines minimum standards for the treatment of
tariffs in the HICP.

(12)

Group of experts

16

Furthermore, under the same framework Council Regulation two implementing
Council Regulations have amended Commission Regulation (EC) No 1749/96 in
respect to HICP coverage. Council Regulation (EC) No 1687/98 extends the
coverage of goods and services, and Council Regulation (EC) No 1688/98
extends the geographic and population coverage and gives the final definition of
“household final monetary consumption expenditure”.

On 7 March 1997 Eurostat published the first set of Harmonized Indices of
Consumer Prices (HICPs) as required by Article 5 (1)
(b) of Council
Regulation (EC) 2494/95. HICPs are designed for international comparisons of
consumer price inflation. They form the basis of the Monetary Union Index of
Consumer Prices (MUICP) used by, among others, the European Central Bank
for the monitoring of inflation in the Economic and Monetary Union and the
assessment of convergence.

as

1749/96

amended

(EC) No

by Council
Commission Regulation
Regulation (EC) No 1687/98, in particular Article 3 and Annex Ia thereof, lay
down that extended coverage in the health, education and social protection
sectors shall be implemented in December 1999 and take effect with the index for
January 2000. Thereby,
inclusion should be
specified in accordance with the procedure laid down in Article 14 of the
framework Council Regulation (EC) No 2494/95. The timetable of inclusion for
hospital services and social protection services provided within the home,
retirement homes and residences for
the disabled should be specified in
accordance with the same procedure.

the methodological details of

This proposed Council Regulation defines the methodological details of inclusion
for products in the health, education and social protection sectors, i.e. how such
products should be treated in the HICP, and the timetable of inclusion for the
exceptions mentioned above.

This proposed Regulation restates that the purchaser prices of goods and services
in the health, education and social protection sectors to be used in the HICP
should, in accordance with set standards(13) and ESA 1995, be the amounts to be
paid by consumers net of reimbursements. The HICP sub-indices concerned
should be calculated using a formula which is consistent with the Laspeyres-type
formula used for other sub-indices, i.e. they should reflect the price change on the
basis of the changed expenditure of maintaining the consumption pattern of
households and the composition of the consumer population in the base or
reference period.

In consistency with the Laspeyres principle and the relevant provisions of
Commission Regulation (EC) No 2646/98 on tariff prices, this draft Regulation
proposes more specifically that changes in purchaser prices which reflect changes
in the rules determining them should be shown as price changes in the HICP and
that changes in the purchaser prices resulting from changes in purchasers’
incomes shall also be shown as price changes in the HICP.

(13)

Commission Regulation (EC) No 1749/96 as amended by Council Regulation (EC) No 1687/98.

17

However, the proposed Regulation makes expressly clear that during a transition
period, Member States may use procedures which differ from those described
just above on the condition that they will provide the Commission (Eurostat) with
a description of the procedures chosen before such procedures are used. Member
States should provide Eurostat, on request, with information sufficient to assess
the operation of these procedures. Eurostat intends to include the result of this
assessment in the report to be submitted by the Commission to the Council as
foreseen in Article 2 of Council Regulation (EC) No 1688/98.

The provisions of this Regulation shall be implemented by the Member States in
December 1999 and shall take effect with the index for January 2000, apart from
the following, which shall be implemented in December 2000 and shall take
effect with the index for January 2001:

a)

b)

c)

hospital services (COICOP/HICP 06.3);

social protection services provided within the home, such as home
cleaning, meals, transport for the disabled (part of COICOP/HICP 12.4.0);

retirement
COICOP/HICP 12.4.0).

homes,

residences

for

the

disabled

(part

of

THE IMPACT ON BUSINESS:

2.

Who will be affected by the proposal?

• which sector of business

HICPs are compiled using weights and prices sampled from all businesses
providing goods and services for the direct satisfaction of consumer needs
within the scope of household final monetary consumption expenditure.
This Regulation targets the treatment of goods and services in the
education, health and social protection sectors. In fact both, the extension
to HICP coverage to cover household final monetary consumption
expenditure and the concept of “purchaser prices” have been established
by Commission Regulation (EC) No 1749/96 as amended by Council
Regulations (EC) Nos 1687/98 and 1688/98. This proposed Regulation
defines the methodological details of inclusion for products in the health,
education and social protection sectors, i.e. how such products should be
treated in the HICP, and the timetable of inclusion for the exceptions
mentioned above. Although the proposed Regulation might involve new
data collection in some Member States it
is not expected to have a
significant impact on small and medium sized enterprises beyond the
additional data collection that may have been imposed by Council
Regulation (EC) No 2494/95. A large part of the goods and services
which will be added to the HICP are provided by the government sector.
In general the participation in such surveys is on voluntary basis.

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• which size of business? (what is the concentration of small and medium

sized firms?)

The size of the businesses is only relevant to the extent that the prices
collected should correctly reflect the price development of all businesses
within the concept of household final monetary consumption expenditure.
In principle, prices should be collected in businesses of all sizes of
suppliers of the goods and services concerned. According to the principle
of subsidiarity, the sample of suppliers of education, health and social
protection services as for other goods and services covered by the HICP is
defined by the National Statistical Institutes.

• are there any particular geographic areas of

the EU where these

businesses are found?

The geographic area is only relevant to the extent that the collected prices
should correctly reflect the price development in the whole economic
territory of the Member States within the concept of household monetary
consumption expenditure. All Member States of the European Union,
Norway and Iceland are concerned.

3.

What will business have to do to comply with the proposal?

National Statistical Institutes send out price collectors to the suppliers.
However, statistical units, such as government agencies, social administrations
or NPISHs, called upon by the Member States to co-operate in the collection
or provision of basic information are obliged to give honest and complete
information at
is requested and allow the organisations and
institutions responsible for compiling official statistics, on request, to obtain
information at the level of detail necessary to evaluate compliance with the
comparability requirements and the quality of the HICP sub-indices.

the time it

4.

What economic effect is the proposal likely to have?

• on employment?

• on investment and the creation of new businesses?

• on the competitive position of businesses?

An indirect effect, in so far as the HICPs allow international comparisons of
consumer price inflation. They provide the statistical basis for compiling the
Monetary Union Index of consumer prices (MUICP), which is the main
indicator for monetary policy of the European Central Bank. A single and
stable currency is an important step to advance European integration and to
promote economic progress with important impact on employment, investment
and competition.

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5.

Does the proposal take account of the specific situation of small and
medium-sized firms (reduced or different requirements etc.)?

The proposed Regulation is not expected to have a significant impact on small
and medium sized enterprises beyond the additional data collection that may
have been imposed by Council Regulation (EC) No 2494/95. According to the
principle of subsidiarity, the sample of suppliers of insurance services as for
other goods and services covered by the HICP is defined by the National
Statistical Institutes.

CONSULTATION:

6.

List the organisations which have been consulted about the proposal and
outline their main views.

DG II of the Commission, the European Central Bank, and the Central Banks
of Member States are participating actively in the meetings of the Working
Party(14) on CPI Harmonization and its Task Forces.

(14)

Group of experts

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COMPLEMENTARY STATEMENT CONCERNING EFTA
COUNTRIES

Title : Proposal for Council Regulation (EC) laying down detailed rules for the
implementation of Council Regulation (EC) No 2494/95 as regards
minimum standards for the Treatment of Products in the Health,
Education and Social Protection Sectors in the Harmonized Index of
Consumer Prices

Impact on EFTA countries

EFTA countries have been involved in discussions of the Statistical Programme
Committee and the Working Party on the Harmonization of Consumer Price Indices.
They are fully aware of the proposals for a Regulation and their views have been
taken into account in preparing this proposal. They intend to compile Harmonized
Indices of Consumer Prices (HICPs) in accordance with this Regulation.

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