CELEX: 51998PC0323(01)
Language: en
Date: 1998-06-04
Title: Proposal for a Council Regulation (EC) amending Regulation (EC) No 1749/96 concerning the coverage of goods and services of the Harmonized Index of Consumer Prices

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                   COMMISSION OF THE EUROPEAN COMMUNITIES
                                                   Brussels, 04.06.1998
                                                   COM(1998) 323 final
                                    Proposal for a
                           COUNCIL REGULATION (EC)
                    amending Regulation (EC) No 1749/96
              concerning the coverage of goods and services of the
                    Harmonized Index of Consumer Prices
                                    Proposal for a
                           COUNCIL REGULATION (EC)
                       amending Regulation (EC) No 1749/96
                concerning the geographic and population coverage
                   of the Harmonized Index of Consumer Prices
                           (presented by the Commission)
 ---pagebreak---  ---pagebreak---                       EXPLANATORY MEMORANDUM
 Reference :     Proposal for Council Regulation (EC) amending Regulation (EC) No
                 1749/96 concerning the coverage of goods and services of the
                 Harmonized Index of Consumer Prices
 1.   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 2494/95. The
      HICPs provide the best statistical basis for international comparisons of consumer price
      inflation and will be used in particular by the European Commission and the European
      Monetary Institute for the assessment of inflation convergence under Article 109 (j) of
      the Treaty establishing the European Community. They will subsequently form the
      basis of the Monetary Union Index of Consumer Prices (MUICP) to be used by, among
      others, the future European Central Bank for the monitoring of inflation in the
     Economic and Monetary Union. The requirement to produce HICPs in no way puts in
     question the right of Member States to publish their national, non-harmonised, inflation
     indices, which they may wish to use for national policy purposes.
2.   Under Council Regulation 2494/95, the Commission has so far adopted three detailed
     regulations establishing the specific implementing measures 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 are 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.
3.   Article 3 of Commission Regulation (EC) 1749/96, defines the initial coverage of the
     HICPs from January 1997/Some difficult categories such as health and educational
     services, where there are major institutional differences between Member States, are
     not yet fully covered by the HICP. The draft regulation amends Commission
    Regulation (EC) 1749/96 with regard to coverage of goods and services and proposes a
     staged procedure on how to extend the coverage of the HICP in December 1998 and
    December 1999 (see also Annex la of the draft regulation).
4.  The concept "household final monetary consumption expenditure" in the proposed
    regulation defines both the goods and services to be covered by the HICP and the price
    concept to be used: prices net of reimbursements, subsidies, and discounts. The draft
    regulation follows the definitions laid down in the European System of Accounts (ES A
     1995) where they are appropriate for international comparisons of inflation (see also
    Annex lb of the draft regulation).
5.  "Household final monetary consumption expenditure" refers only to monetary
    transactions and, therefore, neither includes income in kind, as for example agricultural
    products grown for own consumption, nor services of owner occupied dwellings. In
    particular, the expenditure faced by owner occupiers when acquiring housing expressed
    as imputed rents
                                             e_
 ---pagebreak---       or mortgage interest payments are not regarded as part of the inflationary process and
      hence excluded from the HICPs. Imputed rents are the opportunity costs to owner
      occupiers of living in their houses rather than a reflection of actual prices faced by them as
      consumers. These and any other opportunity costs are not regarded as part of inflation
     Mortgage interest is simply the cost of credit, and credit payments should not normally be
      included in CPIs. The Statistical Programme Committee (SPC) discussed the treatment of
      owner occupied housing in the HICP on 13 March 1997. Many Member States were
      sympathetic to the idea that the prices faced by owner occupiers when acquiring housing
      should be covered by the HICP, but felt that it was premature to proceed with an index of
     net acquisition of new dwellings. A special Task Force will be set up in 1998 by Eurostat.
     Until a satisfactory solution for the services of owner occupied dwellings can be found,
     such expenditure is by definition excluded from "household final monetary consumption
     expenditure".
     The HICPs of the Member States currently cover more than 90% of "household final
     monetary consumption expenditure". The remaining 10% will be added by December 1999.
     6% refers to goods and services which according to the draft regulation would be added in
     two stages, in December 1998 and December 1999. The remaining 4% refers to the
     geographic and population coverage of the HICP. Consultation is proceeding in parallel on
     a draft regulation defining the geographic and population coverage.
     The HICP Working Party1 and its Task Forces have spent many hours in numerous
     meetings over two years discussing the coverage of the HICP. The proposal has obtained
     the agreement of almost all members of the HICP Working Party including the main users
     DG II and the EMI2, who have emphasised that the coverage of the HICP should be as
     broad as possible with respect to consumer price inflation.
1
  Group of experts
2
  However, the EMI has not been formally consulted
                                                    3
 ---pagebreak---                                         Proposal for
                      COUNCIL REGULATION (EC) No [xx/98]
                                           of [date]
                          amending Regulation (EC) No 1749/96
                concerning the coverage of goods and services of 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 prices1, and in particular Articles 4 and 5 (3) thereof,
 Having regard to the proposal from the Commission,
 After consulting the European Monetary Institute,
 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; the requirement to produce HICPs in no way puts in question the
 right of Member States to publish their national, non-harmonised, inflation indices, which
 they may wish to use for national policy purposes;
 Whereas Commission Regulation (EC) No 1749/962 set down an initial coverage for
HICPs that was restricted to those goods and services covered by all or most national
 Consumer Price Indices (CPIs); whereas the prices to be taken for the HICP, in particular
the treatment of subsidies, rebates and reimbursements, require harmonized definitions;
whereas the geographic and population coverage of the HICPs need still to be specified;
Whereas Article 3 of Regulation (EC) No 2494/95 requires that the HICP should be based
on the prices of goods and services available for purchase in the economic territory of the
Member State for the purposes of directly satisfying consumer needs; whereas prices not
actually paid by consumers in such purchases or opportunity costs or interest payments are
not appropriate for international comparisons of consumer price inflation;
Whereas it is recognised that changes in reimbursements might not have an impact on
measures of inflation in a broader context but they do form an essential part of the
inflationary process affecting consumers and therefore need to be reflected in the HICP;
1
     OJ L 257, 27.10.1995, p. 1.                        .
2
     OJL 229, 10.9.1996, p. 3.                            \J
 ---pagebreak--- Whereas the Statistical Programme Committee (SPC) has not delivered an opinion within the
time limit laid down by the chairman; whereas in this case following the procedure laid down in
Article 14 paragraph 2 of Regulation (EC) No 2494/95 the Commission shall, without delay,
submit to the Council a proposal relating to the measures to be taken;
HAS ADOPTED THIS REGULATION:
                                                  Article 1
Annex I of Regulation (EC) No 1749/96 is replaced by Annexes la and lb of the present
Regulation.
                                                  Article 2
 In the first indent of Article 1 of Regulation (EC) No 1749/96 the word "initial" is deleted.
                                                  Article 3
 Sub-paragraph (a) of Article 2 of Regulation (EC) No 1749/96 is replaced by the following:
 " (al) The 'coverage' of the HICP is defined as those goods and services which are included in
           household final monetary consumption expenditure (see Article 3 (a2) below). It is
           classified according to the 4-digit categories and sub-categories given in Annex la to
           this regulation, which derive from the COICOP international classification and shall be
           known as COICOP/HICP (classification of individual consumption by purpose adapted
           totheneedsofHICPs).
    (a2) 'Household final monetary consumption expenditure' is defined as that part of final
           consumption expenditure3 which is incurred by households4 in monetary transactions5
           in one or both of the time periods being compared, and specified in Annex lb to this
           regulation. Unless otherwise stated, Annex lb follows the definitions laid down in the
           European System of Accounts (ESA) 19956. 'Household final monetary consumption
           expenditure' consists of expenditure incurred on goods and services that are used for the
           direct satisfaction of individual needs or wants either by:
           (a2a) resident7 households on the domestic territory or abroad, or
           (a2b) resident and non-resident households on the domestic territory, or
           (a2c) the population of households within the scope of the national household budget
                   survey.
    (a3) Prices used in the HICP are the purchaser prices8 paid by households to purchase
           individual goods and services9 in monetary transactions. Where goods and services
3
     Annex lb No 4 to 27
4
     Annex lb No 1
5
     Annex lb No 3
6
     Council Regulation (EC) No 2223/96 of 25.6.1996, OJL 310, 13.11.1996
7
     Annex lb No 2
8
     Annex lb No 28
                                                            r
 ---pagebreak---           have been available to consumers free of charge, and subsequently an actual price is
          charged, then the change from a zero price to the actual price, and vice-versa, should be
          taken into account in the HICP.
   (a4) The 'weights' of the HICP are the aggregate expenditure by households on any set of
          goods and services covered by the HICP expressed as proportion of the total
          expenditure on all goods and services covered.                                          "
                                               Article 4
Article 3 of Regulation (EC) No 1749/96 is replaced by the following:
 "                                           Coverage
   1.     HICPs compiled from price changes and weights for each category of household final
          monetary consumption expenditure given in Annex la accounting for more than one
          part in a thousand of the total expenditure covered by all those categories included as
          specified in Articled (2), shall be deemed comparable.
   2,     The coverage of the HICP shall be extended, as follows:
          (a)     Starting with the production of the HICP for January 1997, Member States shall
                  process the data collected covering those categories marked as 'initial coverage'
                  as specified in Annex la.
          (b)     On but not before the production of the HICP for December 1998, Member
                  States shall process the data collected covering also those categories marked as
                  'December 1998' as specified in Annex la.
          (c)     On but not before the production of the HICP for December 1999, Member
                  States shall process the data collected covering also those categories marked as
                  'December 1999' as specified in Annex la.                                       "
                                               Article 5
In Article 4 of Regulation (EC) No 1749/96 the words "Annex I" are replaced by the word
"Annex la".
                                               Article 6
This Regulation shall enter into force on the twentieth day following that of 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
9
    Annex lb No 29
 ---pagebreak---                                                                                                          ANNEX Ta
       The coverage of the HICP shall include the following categories of COICOP/HICP:
    Code                        COICOP/HICP Heading                              Initial   Addition Addition Excluded
                                                                               Coverage December December
                                                                               Jan. 1997     1998        1999
 01.        FOOD AND NON-ALCOHOLIC BEVERAGES                                                                                   •
 01.1       Food                                                                                      •
 01.1.1     Bread and cereals                                                      full
 01.1.2 Meat                                                                       full
 01.1.3     Fish                                                                   full
 01.1.4     Milk, cheese and eggs                                                  full
 01.1.5     Oils and fats                                                          full
 01.1.6     Fruit                                                                  full
 01.1.7     Vegetables including potatoes and other tubers                         full
 01.1.8     Sugar, jam, honey, syrups, chocolate and confectionery                 full
 01.1.9 Food products n.e.c.                                                       full
 01.2       Non-alcoholic beverages
 01.2.1     Coffee, tea and cocoa                                                 full
 01.2.2     Mineral waters, soft drinks and juices                                full
 02.        ALCOHOLIC BEVERAGES AND TOBACCO
 02.1      Alcoholic beverages
 02.1.1     Spirits                                                               full
 02.1.2    Wine                                                                   full
02.1.3 Beer                                                                       full
02.2       Tobacco                                                                                                lllllilllll
02.2.1     Tobacco                                                                full
      02.3                                                        Narcotics
    02.3.1                                                        Narcotics
                                                                                                                  iiiiiili
                                                                                                                   excluded
03.        CLOTHING AND FOOTWEAR
03.1       Clothing
03.1.1     Clothing materials                                                     full
03.1.2     Garments                                                               full
03.1.3     Other articles of clothing and clothing accessories                    full
03.1.4     Dry-cleaning, repair and hire of clothing                              full
03.2       Footwear
03.2.1     Shoes and other footwear                                               full
03.2.2     Repair and hire of footwear                                            full
04.        HOUSING, WATER, ELECTRICITY, GAS AND                                                                              :
           OTHER FUELS                                                                                          i
04.1       Actual rentals for housing                                                                           :
04.1.1     Actual rentals paid by tenants                                       part^       full11
04.1.2     Other actual rentals                                                 part lu     full11
      04.2                                    Imputed rentals for housing
    04.2.1                             Imputed rentals of owner-occupiers                                         excluded u
    04.2.2                                          Other imputed rentals                                         excluded12
10
     Relates to the practice followed in the national CPI
1
  '   Refers to all rentals actually paid by tenants, i.e. the rentals the tenant pays to the landlord regardless of any
     social benefits the tenant receives from public authorities (including payments which at the tenant's discretion
     go directly to the landlord); see also Annex lb No 12b
12
     This does not prejudge the coverage of owner occupied housing in general
                                                                                                            —-Pag?T'
                                                                   ^
 ---pagebreak---    Code                         COICOP/HICP Heading                              Initial    Addition Addition Excluded
                                                                              Coverage December December
                                                                              Jan. 1997        1998          1999
04.3        Regular maintenance and repair of the dwelling                                        •e                  ; ,,
04.3.1      Products for the regular maintenance and repair of the               full13
            dwelling
04.3.2      Services for the regular maintenance and repair of the               full13
            dwelling
04.4        Other services relating to the dwelling                                                               si         :
04.4.1      Refuse collection                                                   part14        full1*
04.4.2      Sewerage services                                                   part14        full15
04.4.3      Water supply                                                        part14        full15
04.4.4      Other services relating to the dwelling n.e.c.                        full
04.5        Electricity, gas and other fuels                                                             '
04.5.1      Electricity                                                           full
04.5.2      Gas                                                                   full
04.5.3      Liquid fuels                                                          full
04.5.4      Solid fuels                                                           full
04.5.5      Hot water, steam and ice                                              full
05.     ... FURNISHINGS, HOUSEHOLD EQUIPMENT AND                                            s
            ROUTINE MAINTENANCE OF THE HOUSE                                             s-
                                                                               %
05.1        Furniture, furnishings and decorations, carpets and other
            floor coverings and repairs                                                                               '
05.1.1      Furniture and furnishings                                             full
05.1.2      Carpets and other floor coverings                                     full
05.1.3      Repair of furniture, furnishings and floor coverings                  full
05.2        Household textiles                                                                                               i
05.2.1      Household textiles                                                    full
05.3        Heating and cooking appliances, refrigerators, washing                              '    ' / ' •
            machines and similar major household appliances,                                                            ,** 1
            including fittings and repairs
05.3.1      Major household appliances whether electric or not                    full
05.3.2      Small electric household appliances                                   full
05.3.3      Repair of household appliances                                        full
05.4        Glassware, tableware and household utensils                                                                      ;
05.4.1      Glassware, tableware and household utensils                           full
05.5        Tools and equipment for house and garden
05.5.1      Major tools and equipment                                             full
05.5.2      Small tools and miscellaneous accessories                             full
05.6        Goods and services for routine household maintenance
05.6.1      Non-durable household goods                                           full
05.6.2      Domestic services and home care services                              full
06.         HEALTH                                                                                              % _,%t\;f. '
06.1        Medical products, appliances and equipment
06.1.1      Medical products, appliances and equipment                          part16        full17
13   Refers to expenditure which tenants or owner-occupiers incur on materials and services for minor maintenance
     and repairs; following a decision on the treatment of owner occupied housing, the coverage of this categories
     might need to be extended to include expenditure for major decoration, maintenance and repair of the dwelling
     and for extensions and conversions of the dwelling not typically paid by tenants; see also Annex lb No 4 and
     15
     Refers to expenditure according to consumption
     Refers to separately identifiable charges for specific services relating to the dwelling whether or not consumers
     pay according to consumption that is, excluding payments for services financed out of general taxation; see
     also Annex lb No 9 and 29
     Refers to health goods outside the social security system
 ---pagebreak---   Code                        COICOP/HICP Heading                          Initial    Addition Addition Excluded
                                                                         Coverage December December
                                                                         Jan. 1997       1998       1999
                                                                                              r
06.2       Out-patient services                                                                                           ;
06.2.1 Medical services                                                                 full17
06.2.2 Dental services                                                                  full17
06.2.3 Paramedical services                                                             full17
06.3       Hospital services                                                                                         -
06.3.1 Hospital services18
07.        TRANSPORT                                                                                         ;           i
07.1       Purchase of vehicles
07.1.1A New motor cars                                                       full
07. LIB Second-hand motor cars                                               full
07.1.2 Motor cycles                                                          full                      ,
07.1.3 Bicycles                                                              full
07.2       Operation of personal transport equipment                                                                     i
07.2.1 Spares parts and accessories                                          full
07.2.2 Fuels and lubricants                                                  full
07.2.3 Maintenance and repairs                                               full
07.2.4 - Other services in respect of personal transport equipment         fulliy
07.3       Transports services                                                                                           j
07.3.1 Passenger transport by railway                                        full
07.3.2 Passenger transport by road                                           full
07.3.3 Passenger transport by air                                            full
07.3.4 Passenger transport by sea and inland waterway                        full
07.3.5 Other purchased transport services                                    full
07.3.6 Combined tickets                                                    fuU*u
08.        COMMUNICATIONS                                                                                                i
08.1       Communications                                                                                                :
08.1.1 Postal services                                                       full
08.1.2 Telephone and telefax equipment                                       full
08.1.3 Telephone, telegraph and telefax services                             full
09.        RECREATION AND CULTURE                                                                                        :
09.1       Audio-visual, photographic and data processing
           equipment and accessories, including repairs                                                                  \
09.1.1 Equipment for the reception, recording and reproduction of            full                                      '
           sound and pictures
09.1.2 Photographic and cinematographic equipment and optical                full
           instruments
09.1.3 Data processing equipment                                             full
09.1.4 Recording media for pictures and sound                                full
09.1.5 Repair of audio-visual, photographic and data processing and          full
           accessories
17   Full coverage refers to that part of expenditure on health goods and services (other than hospital out-patient
     services) which is paid by the consumer and not reimbursed by government, social security or NPISHs; see
     Annex lb No 12a and the methodological details of inclusion as specified in accordance with the procedure
     laid down in Article 14 of Council Regulation (EC) No 2494/95
18  The methodological details and the timetable of inclusion shall be specified in accordance with the procedure
     laid down in Article 14 of Council Regulation (EC) No 2494/95
19   Includes driving licences, road worthiness tests, motor associations fees, tolls for bridges, tunnels, shuttle-
    ferries, and motorways; excludes licences to own or use vehicles; see also Annex lb No 9, 18, and 19b
20   Refers to tickets covering two or more modes of transport and the expenditure cannot be apportioned between
    them
                                                   ^
                                                                                                            Page tT
 ---pagebreak---    Code                        COICOP/HICP Heading                           Initial   Addition Addition      Excluded
                                                                           Coverage December December
                                                                           Jan. 1997     1998       1999
09.2       Other major durables for recreation and culture
09.2.1     Other major durables for recreation and culture                     full
09.2.2     Repair of other major durables for recreation and culture           full
09.3       Other recreational items and equipment; flowers,
           gardens and pets
09.3.1     Games, toys and hobbies, equipment for sport, camping and           full
           open-air recreation
09.3.2     Gardening                                                           full
09.3.3     Pets                                                                full
09.4       Recreational and cultural services
09.4.1     Sporting and recreational services                                full21
09.4.2     Cultural services                                                 full22
    09.4.3                                              Games of chance                                       excluded
09.5       Newspapers, books and stationery
09.5.1     Books                                                             part23     full24
09.5.2     Newspapers and periodicals                                         full
09.5.3 .. Miscellaneous printed matter                                        full
09.5.4     Stationery and drawing materials                                  part23     full24
09.6       Package holidays
09.6.1     Package holidays                                                   full
 10.       EDUCATION
10.1       Educational services
 10.1.1    Pre-primary and primary education                                            full24
 10.1.2    Secondary education                                                          full24
 10.1.3 Tertiary education                                                              full24
 10.1.4    Education not definable by level                                  part25     full24
11.        HOTELS, CAFES AND RESTAURANTS
11.1       Catering
 11.1.1    Restaurants and cafes                                              full
 11.1.2    Canteens                                                          part23     full24
11.2       Accommodation services
 11.2.1 Accommodation services                                               part23     full24
12.        MISCELLANEOUS GOODS AND SERVICES
12.1       Personal care                                                                                •
12.1.1     Hairdressing salons and personal grooming establishments           full
12.1.2 Appliances, articles and products for personal care                    full
    12.1.3                                  Personal care services n.e.c.                                     excluded
12.2       Personal effects n.e.c.                                                                          .
12.2.1     Jewellery, clocks and watches                                      full
12.2.2     Other personal effects                                             full
21   Includes fees or subscriptions to sport clubs and fitness centres; it also includes payments for hunting and
     fishing licences if the government uses the issue of licences to organise some proper regulatory function; see
     also Annex lb No 9 and 19b
22 Includes entrance fees to museums, fees for libraries, and licence fees and subscriptions to TV and radio; see
     also Annex lb No 9 and 10
     Includes educational goods and services only if they are fully paid by consumers
2A Full coverage refers to that part of expenditure on educational goods and services which is paid by the
     consumer and not reimbursed by government, social security or NPISHs; see Annex lb No 12a and the
     methodological details of inclusion as specified in accordance with the procedure laid down in Article 14 of
     Council Regulation (EC) No 2494/95
     Refers to computer courses, language courses, typing courses, and other such courses which are fully paid by
     the consumer
                                                         A^                                                "PaueT
 ---pagebreak---    Code                         COICOP/HICP Heading                            Initial   Addition Addition         Excluded
                                                                             Coverage December December
                                                                             Jan. 1997      1998         1999
 12.3       Social protection
 12.3.1     Social protection services                                                    part 2 6
 12.4       Insurance
    12.4.1                                                    Life insurance                                       excluded
 12.4.2     Insurance connected with the dwelling                              part27      full2*
 12.4.3     Insurance connected with health                                                          fuuzy, 3U
 12.4.4     Insurance connected with transport                                 part31                 full 32 ' 30
 12.4.5     Other insurance                                                                           6,1133.30
 12.5       Financial services n.e.c.
 12.5.1     Financial services n.e.c.                                          part34                   full35
    12.5.2                                                            FISIM                                        excluded
 12.6       Other services n.e.c.
 12.6.1     Other services n.e.c.                                              full36
26 Refers to crèches, nurseries, play-schools and kindergartens which are not an obligatory part of the educational
     system; covered are only those expenditure which are paid by the consumer and not reimbursed by
     government, social security or NPISHs; see also Annex lb No 12a; other items within code 12.3.1 such as
     retirement homes, schools for the disabled, home cleaning services, and meal programmes are subject to the
     same arrangement as described in footnote 18
27 Refers to service charges for contents-insurance
28 Refers to all service charges paid by owner-occupiers and tenants for the kinds of insurance typically taken out
     by tenants against fire, theft, water damage, etc.; see also Annex lb No 7, 8 and 24; following a decision on the
     treatment of owner occupied housing, the coverage of this categories might need to be extended to include
     service charges paid by owner-occupiers for the kinds of insurance for the dwelling typically taken out by
     landlords
29 Refers to service charges for private sickness and accident insurance; see also Annex lb No 7, 8 and 24 and the
     methodological details of inclusion of category "06. Health" as specified in accordance with the procedure laid
     down in Article 14 of Council Regulation (EC) No 2494/95
30 The methodological details and the timetable of inclusion shall be specified in accordance with the procedure
     laid down in Article 14 of Council Regulation (EC) No 2494/95. The implementation may be scheduled for an
     earlier date
31 Refers to service charges for insurances in respect of personal transport equipment
32 Refers to service charges in respect of personal transport equipment, travel insurance and luggage insurance;
     see also Annex lb No 7, 8 and 24
33 Refers to service charges for insurance such as civil liability for injury or damage to third parties or their
     property not arising from the operation of personal transport equipment; see also Annex lb No 7, 8 and 24
34 Refers to banking service charges which are not expressed as proportion of the transaction value
35 Refers to financial services including banking services; not covered are service charges for private or public
     pension funds, which are a kind of life insurance but restricted to specific groups of persons, as well as interest
     payments; see also Annex lb No 21 and 23
36 Includes fees for the issue of passports, birth, marriage or death certificates, and dues for membership to
     professional associations if they can be considered as payments for the services rendered; see Annex lb No 9
     and 19
                                                                        •nn
 ---pagebreak---                                                                                   ANNEX Th
A    Definition of Household final monetary consumption expenditure
 1.  The household sector includes individuals or groups of individuals (as defined in ES A
     2.76.a and 2.76.b) and may or may not include institutional households (as defined in
     ESA 2.76.b).
2.   A resident household has its centre of economic interest within the economic territory
     of the Member State, which may or may not include territorial or extraterritorial
     enclaves (as defined in ESA 2.04. to 2.07.).
3.   A monetary transaction is an economic flow that is an interaction between
     institutional units by mutual agreement, where the units involved make or receive
     payments, or incur liabilities or receive assets denominated in units of currency. By
     convention the collection of household refuse shall be considered as interaction by
     mutual agreement. Transactions that do not involve the exchange of cash, or assets or
     liabilities denominated in units of currency, are non-monetary transactions. Intra-unit
     transactions are normally non-monetary transactions. Non-monetary transactions
     involving more than one institutional unit occur among transactions in products (barter
     of products), distributive transactions (remuneration in kind, transfers in kind, etc.) and
     other transactions (barter of non-produced non-financial assets).
               Household final monetary consumption expenditure covers
                              the following borderline cases:
4.   It covers items not treated as intermediate consumption, like materials for small repairs
    to and interior decoration of dwellings of a kind typically carried out by tenants as well
    as owners, and materials for repairs and maintenance to consumer durables, including
    vehicles.
5.  It covers items not treated as capital formation, in particular consumer durables, that
    continue to perform their function in several accounting periods; this includes the
    transfer of ownership of some durables from an enterprise to a household.
6.  It covers financial services directly charged.
7.  It covers non-life insurance services by the amount of the implicit service charge.
8.  It covers all expenditure financed out of non-life insurance claims, including payments
    made directly by the insurance companies to the garages, hospitals, doctors, etc. This
    implies that the full price paid by households or by insurance companies to the garages,
    hospitals, doctors, etc. is covered by the HICP.
    Non-life insurance claims are the amounts which insurance enterprises are obliged to
    pay in settlement of injuries or damage suffered by persons or goods. They are current
    transfers from the insurance companies to the receiving households and, therefore, enter
    into the households' disposable income. Any expenditure made as a result, for example
    payments to garages, hospitals, or doctors, is treated as being incurred by the
    households and not by the insurance companies. It is irrelevant whether the households
 ---pagebreak---      actually make the expenditure before the claims are paid out, which then look like
     social security reimbursements, or whether the payments are made directly by the
     insurance companies to the garages, hospitals, etc. In the latter case, the companies are
     treated merely as agents acting on behalf of the households who are still treated as
     incurring the expenses.
9.   It covers payments by households for licences, permits, etc. which are regarded as
     purchases of services. If the government uses the issue of licences to organise some
     proper regulatory function, such as checking the competence or qualification of the
     person concerned, the payments made should be treated as a purchase of services from
     government and the prices taken in the HICP, but if the licences are being granted
     automatically on payment of the amounts due, payments should be treated as direct
     taxes and not prices. Driving or pilot's licences, television or radio licences, firearm
     licences, museum or library admissions, garbage disposal fees, etc. are treated in most
     cases as purchases of services rendered by government, whereas licences on the use of
     vehicles, boats or aircraft are treated in most cases as taxes.
10.  It covers the purchase of output at not economically significant prices, e.g. entrance
     fees for a museum.
         Household final monetary consumption expenditure does not cover
                              the following borderline cases:
11.  It does not cover income in kind because it is no monetary transaction (although
    according to ES A 3.76.b it is included in final consumption expenditure).
12. (a)    It does not cover social transfers in kind received by households, including those
           parts of expenditure initially made by households for which they are subsequently
           reimbursed by social security, government units or NPISHs, e.g. for medical
           expenses or education. When a household purchases a good or service for which
           it is subsequently reimbursed in part or in whole, the household is treated merely
           as agents acting on behalf of a social security fund, government unit or NPISH.
           The amounts reimbursed to households are treated as social transfers in kind
           made by social security, government units or NPISHs. They are not recorded as
           cash transfers to households and do not form part of households' disposable
           incomes. This accounting treatment leads to the same result as when a social
           security fund purchases the goods and services from market producers and then
           re-sells them to households at low non-market prices. This implies that the price
           taken for the HICP is the amount paid by the household less the reimbursement.
    (b)    All other rebates by public authorities, especially housing payments to tenants in
           order to reduce their rents (including payments which at the tenant's discretion go
           directly to the landlord), are considered as social benefits in cash and, therefore,
           enter into households' disposable income. This implies that the full price of the
           good or service before the rebate is covered by the HICP.
13. It does not cover services of owner occupied dwellings, because these are no monetary
    transactions (although according to ES A 3.76.a it is included in final consumption
    expenditure).
                                              13
 ---pagebreak--- 14.   It does not cover the purchase of dwellings, and items treated as acquisitions of a non-
      produced assets, in particular the purchase of land.
15.   It does also not cover expenditure that an owner-occupier incurs on the decoration,
      maintenance and repair of the dwelling not typically carried out by tenants.
16.   It does not cover the expenditure on valuables.
17.   It does not cover expenditure by households owning un-incorporated enterprises when
      incurred for business purposes.
18.   It does not cover current taxes on income and wealth, which are all compulsory,
      unrequited payments, in cash or in kind, levied periodically by general government and
      by the rest of the world on the income and wealth of institutional units, and some
      periodic taxes which are assessed neither on the income nor the wealth. Other current
      taxes include all those payments by households for licences which are to be regarded as
    . taxes, such as licences to own or use vehicles, boats or aircraft, etc.
19.   (a)   It does not cover subscriptions, contributions and dues paid by households to
            NPISHs, like trade unions, professional societies, consumers' associations,
            churches and social, cultural, recreational and sports clubs.
      (b)   However, if a club, union, society or association can be considered as a market
            producer selling its services at an economically significant price, which usually is
            the case even though the legal status may be a non-profit organisation, then the
            subscriptions, contributions and dues paid by households are considered as
            payments for the services rendered - not as a transfer - and, thus, covered by the
            HICP.
20.   It does not cover voluntary transfers in cash or in kind by households to charities, relief
      and aid organisations.
21.   It does not cover payments of property income, including interest. Property income is
      the income receivable by the owner of a financial asset or a tangible non-produced asset
      in return for providing funds to, or putting the tangible non-produced asset at the
      disposal of, another institutional unit. Under the terms of the financial instrument
      agreed between them, interest is the amount that the debtor becomes liable to pay to the
      creditor over a given period of time without reducing the amount of principal
      outstanding.
22.   It does not cover compulsory or voluntary social contributions, such as employers'
      actual social contributions to social security funds, insurance enterprises or autonomous
      as well as non autonomous pension funds administering social insurance schemes to
      secure social benefits for their employees, or employees' social contributions payable
      to social security, private funded and unfunded schemes.
23.   It does not cover life insurance and pension funding services (although according to
      ES A 3.76.f and g such services are included in final consumption expenditure by the
      amount of the implicit service charge).
                                            /]^f                                       —PagrïT
 ---pagebreak--- 24.  It does not cover net non-life insurance premiums. These are premiums payable under
     policies taken out by institutional units. The policies taken out by individual households
     are those taken out on their own initiative and for their own benefit, independently of
     their employers or government and outside any social insurance scheme. Net non-life
     insurance premiums comprise both the actual premiums payable by policy holders to
     obtain insurance cover during the accounting period (premiums earned) and the
     premium supplements payable out of the property income attributed to insurance policy
     holders, after deducting the service charges of insurance enterprises arranging the
     insurance. (NB: This service charge is covered by the household final monetary
     consumption expenditure!). Net non-life insurance premiums are the amounts available
     to provide cover against various events or accidents resulting in damage to goods or
     property, or harm to persons as a result of natural or human causes, for example fires,
      floods, crashes, collisions, sinkings, theft, violence, accidents, sickness, or against
      financial losses resulting from events such as sickness, unemployment, accidents, etc.
25.   It does not cover current transfers between households, which consist of all current
      transfers in cash or in kind made, or received, by resident households to, or from, other
    ..resident or non-resident households.
26.   It does not cover fines and penalties. They are imposed on institutional units by courts
      of law or quasi-judicial bodies and treated as compulsory current transfers. Also not
      covered are fines and penalties imposed by tax authorities for the evasion or late
      payment of taxes, which cannot usually be distinguished from the taxes themselves.
27.   It does not cover lotteries and gambling; neither the payment of the service charge to
      the unit organising the lottery or gambling, nor the residual current transfer that is paid
      out to the winners (although according to ES A 4.135 the service charge is included in
      final consumption expenditure).
B     Definition of Price
28.   At the time of purchase, the purchaser's price is the price for the products the
      purchaser actually pays; including any taxes less subsidies on the products; after
      deductions for discounts for bulk or off-peak-purchases from standard prices or
      charges; excluding interest or services charges added under credit arrangements;
      excluding any extra charges incurred as a result of failing to pay within the period
      stated at the time the purchases were made.
29.   Goods and services for individual consumption ('individual goods and services') are
      acquired by a household and used to satisfy the needs and wants of members of that
      household. Individual goods and services have the following characteristics:
      (a)    It must be possible to observe and record the acquisition of the good or services
             by an individual household or member thereof and also the time at which it took
             place;
      (b)    the household must have agreed to the provision of the good or service and take
             whatever action is necessary to make it possible, for example by attending a
             school or clinic;
                                               AS                                      -Page 12'
 ---pagebreak--- (c)    the good or service must be such that its acquisition by one household or person,
       or possibly by a small, restricted group of persons, precludes its acquisition by
       other households or persons.
All household final consumption expenditure is individual. By convention, all goods
and services provided by NPISHs are treated as individual.
By convention, all government final consumption expenditure on education, health,
social security and welfare, sport and recreation, and culture should be treated as
expenditure on individual consumption services except for expenditure on general
administration, regulation, research, etc. In addition, expenditure on the provision of
housing, the collection of household refuse, and the operation of transport system
should also be treated as individual. The collective consumption expenditure is the
remainder of the government final consumption expenditure. It consists in particular of
management and regulation of society, the provision of security and defence, the
maintenance of law and order, legislation and regulation, the maintenance of public
health, the protection of the environment, research and development, and the
infrastructure and economic development.
                                     'f £                                       Page 19*
 ---pagebreak---                            FINANCIAL STATEMENT
1.  Title of operation
    Council Regulation (EC) amending Regulation (EC) No 1749/96 concerning the
    coverage of goods and services of the Harmonized Index of Consumer Prices.
2.  Budget heading involved
    Article B5-604.
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 convergence
          criteria requirements of the Treaty establishing the European Community. Council
          Regulation (EC) No 2494/95 provides the framework for detailed Commission
          Regulations requiring Member States to produce HICPs following concepts
          methods and practices which have been proposed by the Working Party1 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.
          Commission Regulation (EC) No 2454/97 of 10 December 1997 defines
         minimum standards for the quality of the weights used in the computation of the
         HICP.
   Group of experts
                                   Ol
 ---pagebreak---          The Commission Decision of 9 September 1996 [ref. No C(96)2452] provides for
         the funding of part of the additional costs to Member States.
        This draft Council Regulation amends Regulation (EC) No 1749/96 with regard to
        the coverage of goods and services. It proposes a staged procedure for extending
        the coverage of the HICP to include difficult categories such as health and
        educational services, where there are major institutional differences between
         Member States.
         In parallel consultation is proceeding on a draft Council Regulation amending
         Regulation (EC) No 1749/96 with respect to the geographic and population
         coverage of the Harmonized Index of Consumer Prices.
   4.2   Period covered and arrangements for renewal
        The 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 and fourth, in December
         1998 and 1999, will also involve substantial resources.
5. Classification of expenditure or revenue
   DNO : CD.
6. Type of expenditure or revenue
   Subvention cofinancing (66.6%) with national administrations;
   Administrative expenditure - see paragraph 10.
7. Financial impact
   7.1  Method of calculating the total cost of the action
        The proposed extensions to the coverage of the HICP are necessary to achieve
        comparability. However, they will involve significant additional resources in
        Member States, and in accordance with Article 13 of Council Regulation (EC) No.
        2494/95 the Commission (Eurostat) will bear two-thirds of these additional costs
        until the end of the second year of implementation of the measures. It is estimated
        that costs will not exceed 4,5 million Ecu up to 1998 for the implementation of the
        measures required by the Council Regulation (EC) No. 2494/95 of which the costs
        of this fourth regulation will not exceed 0,5 million Ecu during the above period.
        The costs to the Commission of this fourth Regulation will therefore not exceed
        2/3 of 0,5 million Ecu. Some Member States are better equipped to handle the
        necessary system changes than others.
                                           1*6
 ---pagebreak---     7.2   Breakdown of the cost of the action
          Member States will produce a breakdown of the costs of their action as part of the
          process of agreeing contracts.
8.  Fraud prevention measures
    Contractual arrangements with Member States will be set in place to ensure 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 as
          will decisions by the EMI and the Commission as regards both Monetary Union
          and other macro-economic developments.
    9.2   Grounds for the operation
          The Council Regulation should lead to improved reliability and international
          comparability of the CPIs of Member States. It should lead too to a sharing of
          expertise and technological applications on CPI compilation between Member
          States.
          Main factor of uncertainty:
          The Council Regulation provides only a framework within which many technical
          details must be resolved in collaboration with Member States.
    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 provides for a review by November 1997 and again by
          November 1999. The 1997 review has already been sent to the Secretariat General
          of the Commission for submission to the Council of Ministers.
10. Administrative expenditure (Section III, Part A of the budget)
                                   4<3
 ---pagebreak--- Actual mobilisation of the necessary administrative resources will depend on the
Commission's annual decision on the allocation of resources, taking into account the
number of staff and additional amounts authorised by the budgetary authority.
10.1 Effect on the number of posts
    Type of post        Staff to be assigned to managing                 Source              Duration
                                  the operation
                          Permanent          Temporary         Existing         Additional   3 years
                             posts              posts        resources in       resources
                                                              the DG or
                                                             department
                                                              concerned
 Officials or     A            VA                                 VA
  temporary       B             2                                  2
     staff        C             1                                  1
   Other resources              2                                  1
       (experts)
        A-7000
         Total                 VA                                 VA
The annual cost of existing resources is:
        Officials (titles Al, A2, A4, A5) = 682.500 Ecu x 3 years                  = 2.047.500
        Experts (A-1178)                           = 98.000 Ecu x 3 years          = 294.000
                                                           Total                   = 2.341.500
10.2 Overall financial impact of additional human resources
       none
10.3 Increase in other administrative expenditure as a result of the operation
                                                                                                  Ecu
             Budget heading                    Amounts                  Method of calculation
 A - 7031 Working groups of the                  96.000      4 meetings at 8 K Ecu covering
 Statistical Programme                                       delegates expenses (x 3 years)
 Committee
 The costs of the audit missions to ten Member States per year - three days at 120 Ecu
 per day + fares - is estimated at 31.800 Ecu:
       A-701                                          31.800 Ecu x 3 years         = 95.400
 ---pagebreak---          STATEMENT OF IMPACT OF THE PROPOSAL ON
        INDUSTRY AND IN PARTICULAR ON SMALL AND
                             MEDIUM ENTERPRISES
Title of proposal:
Proposal for Council Regulation (EC) amending Regulation (EC) No 1749/96 concerning the
coverage of goods and services of the Harmonized Index of Consumer Prices
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 convergence criteria requirements of the Treaty
    establishing the European Community. HICPs are designed for international comparisons
    of consumer price inflation. They will be used in particular by the European Commission
    and the European Monetary Institute for the assessment of inflation convergence under
    Article 109 (j) of the Treaty establishing the European Community. HICPs will
    subsequently form the basis of the Monetary Union Index of Consumer Prices (MUICP)
    to be used by, among others, the future European 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 following concepts methods and
    practices which have been proposed by the Working Party1 on CPI Harmonization and
    approved by the Statistical Programme Committee following the Regulatory Committee
    procedure. In accordance with Article 5 (3) of the Council Regulation, implementing
    measures are necessary for ensuring comparability of HICPs and for maintaining and
    improving their reliability. So far the Commission has adopted three 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.
    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 2494/95. The
    HICPs provide the best statistical basis for international comparisons of consumer price
    inflation and very considerable progress has been made in harmonizing methodologies.
   Group of experts
                                               £-1
 ---pagebreak---  However, more work remains to be done to achieve further harmonization of consumer
 price indices.
 Article 3 of Commission Regulation (EC) 1749/96 defines the initial coverage of the
 HICPs from January 1997. Some difficult categories such as health and educational
 services, where there are major institutional differences between Member States, are not
 fully covered by the HICP. The proposed regulation amends Commission Regulation
 (EC) 1749/96 with regard to coverage. The concept "household final monetary
 consumption expenditure" in the draft regulation defines both the goods and services to
 be covered by the HICP and the prices used in the HICP, which should be taken net of
reimbursements, subsidies, and discounts. The draft regulation follows the definitions laid
 down in the European System of Accounts (ESA 1995) where they are appropriate for
 international comparisons of inflation. It defines that the coverage of the HICP shall be
completed in two stages, in December 1998 and December 1999, as follows:
a)     Rents: By December 1998 the treatment of subsidised rents will be harmonized.
b)     Services connected with the dwelling: By December 1998 the coverage of refuse
       collection, sewerage services and water supply, unless they are financed out of
     -general taxation, will be extended.
c)    Financial services: By December 1999 the HICP will cover the remaining financial
       services, e.g. charges for tax consultancy or investment advice.
d)    Education: By December 1998 the HICP will cover all educational goods and
      services in a harmonized way. Education will be covered on a net basis, i.e. the
      weight and the prices will refer to the amounts actually paid by consumers net of
      reimbursements by government. This applies to school books and other materials,
      school meals, and to educational services provided by all types of schools and
      universities. To solve some of the methodological details, including the treatment of
      income dependent prices, a special Task Force has been set up by Eurostat.
e)    Health: By December 1998 the HICP will cover all health goods and services (apart
      from hospital services) in a harmonized way. Health will be covered on a net basis,
      i.e. the weight and the prices will refer to the amount actually paid by consumers net
      of reimbursements by social security. The Task Force will look at the methodological
      details of implementation. The methodology for the inclusion of hospital services
      will be settled no later than December 1998. The category will be included as soon as
      possible thereafter.
f)    Insurance: By December 1998 the HICP will cover all insurances connected with the
      dwelling, not only contents insurance. By December 1999 at the latest the HICP will
      also cover private health, civil liability, and travel insurance. The methodology will
      be settled by another special Task Force set up by Eurostat. If the Task Force finds an
      early solution, the implementation could be scheduled for an earlier date.
g)    Social protection services: By December 1998 the HICP will cover the services
      provided by crèches, nurseries, play-schools and kindergartens in a harmonized way.
      They will be covered on a net basis, i.e. the weight and the prices refer to the amount
      actually paid by the consumer net of reimbursements by government. Other social
      protection services, especially retirement homes, give rise to similar implementation
      problems as hospital services. However, since those services are of growing
      importance they should be covered by the HICP. The methodology for the inclusion
      of, for example, retirement homes will be settled no later than December 1998. The
      category will be included as soon as possible thereafter.
                                      2Z
 ---pagebreak---       Taking into account the current state of the technical discussions, the following goods and
      services will not be covered by the HICP at least until the year 2000: narcotics, imputed
     rentals of owner occupiers, other imputed rentals, games of chance, certain personal care
     services, life insurance and financial intermediation services indirectly measured.
The impact on business:
2.   Who will be affected by the proposal?
         •    which sector of business
Consumer price indices are compiled using prices and weights. The weights are mainly
derived from already existing information. The prices are collected from all businesses
providing goods and services for the direct satisfaction of consumer needs within the scope of
household final monetary consumption expenditure, hereafter referred to as "retailers".
According to the principle of subsidiarity, the sample of retailers is defined by the National
Statistical Institutes. They already send price collectors to retailers to collect the prices for
calculating their national consumer price indices (CPIs). The HICPs are mainly based on that
information. However, the proposed regulation might involve new data collection in some
Member States. The goods and services that will be added to the HICP are to a large extent
provided by the government sector.
         •    which size of business? (what is the concentration of small and medium sized
             firms?)
The size of the business is only relevant to the extent that the prices collected should correctly
reflect the price development of all businesses within the concept of household monetary
consumption expenditure. In principle, all sizes of retailers are concerned. According to the
principle of subsidiarity, the sample of retailers 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 prices collected should correctly
reflect the price development of 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 businesses have to do to comply with the proposal?
National Statistical Institutes send out price collectors to retailers. To comply with the
proposed regulation the retailers need to give price collectors access to their premises and
permission to collect the prices. In practice, the participation in such surveys is on a voluntary
basis.
4.   What economic effect is the proposal likely to have?
         •    on employment?
         •    on investment and the creation of new businesses?
                                              23
 ---pagebreak---          •     on the competitive position of businesses?
An indirect effect, in so far as the HICPs allow international comparisons of consumer price
inflation, and provide the statistical basis for the assessment of inflation convergence under
Article 109 (j) of the Treaty establishing the European Community. In Stage III of EMU, the
HICPs will be used to compile the Monetary Union Index of consumer prices (MUICP),
which will be the indicator for monetary policy of the future 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.
5. Does the proposal take account of the specific situation of small and medium-sized
     firms (reduced or different requirements etc.)?
According to the principle of subsidiarity, the sample of retailers is defined by the National
Statistical Institutes. They already send price collectors to retailers to collect the prices for
calculating their national consumer price indices (CPIs). The HICPs are mainly based on that
information. The goods and services that will be added to the HICP are to a large extent
provided by the government sector. In general, the participation in such surveys is on a
voluntary basis. However, the proposed regulation might involve new data collection in some
Member States.
Consultation:
6. List the organisations which have been consulted about the proposal and outline
     their main views.
The European Advisory Committee on Statistical Information in the Economic and Social
Spheres (CEIES)2, DG II of the Commission, the European Monetary Institute, and Central
banks of Member States are participating actively in the meetings of the Working Party3 on
CPI Harmonization and its Task Forces. They emphasised that the HICP should have as broad
a coverage as possible and are, therefore, in favour of the proposed regulation.
    established by Council Decision 91/116/EEC; the Committee is made up of representatives from the
    scientific, economic and social fields covering producers and users of statistical information
    Group of experts
                                                      £v
 ---pagebreak---   COMPLEMENTARY STATEMENT CONCERNING EFTA
                                  COUNTRIES
Title : Proposal for Council Regulation (EC) amending Regulation (EC) No 1749/96
         concerning the coverage of goods and services of 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 the draft. They intend to compile Harmonized Indices of Consumer Prices
(HICPs) in accordance with this Regulation.
                                     2s-
 ---pagebreak---                        EXPLANATORY MEMORANDUM
 Reference :     Proposal for Council Regulation (EC) amending Regulation (EC) No
                 1749/96 concerning the geographic and population coverage of the
                 Harmonized Index of Consumer Prices
 1. 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 2494/95. The
     HICPs provide the best statistical basis for international comparisons of consumer price
     inflation and will be used in particular by the European Commission and the European
     Monetary Institute for the assessment of inflation convergence under Article 109 (j) of the
     Treaty establishing the European Community. They will subsequently form the basis of
     the Monetary Union Index of Consumer Prices (MUICP) to be used by, among others, the
     future European Central Bank for the monitoring of inflation in the Economic and
     Monetary Union. The requirement to produce HICPs in no way puts in question the right
     of Member States to publish their national, non-harmonised, inflation indices, which they
     may wish to use for national policy purposes.
2. Under Council Regulation 2494/95, the Commission has so far adopted three detailed
     regulations establishing the specific implementing measures 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 are 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.
3. Article 3 of Council Regulation (EC) No 2494/95 requires that the HICP shall be based
    on the prices of goods and services available for purchase on the economic territory of the
    Member State for the purposes of directly satisfying consumer needs. However a
    harmonized definition of the geographic and population coverage of the HICP is still
    needed and the draft regulation seeks to provide this. It specifies that the coverage, for the
    calculation of HICP weights, should include all household final monetary consumption
    expenditure which takes place on the economic territory of that Member State. In
    particular the coverage should include expenditure by foreign visitors (the "domestic
    concept") and individuals living in institutions, and exclude the expenditure of residents
    whilst in a foreign country. All private households should also be included irrespective of
    the area in which they live or their position in the income distribution. Expenditure
    incurred for business purposes should be excluded.
4. A harmonized definition of the geographic and population coverage of the HICP is
    required for the purpose of achieving comparability and also to avoid gaps or double
    counting when aggregating the HICPs of Member States to calculate the European index
    of consumer prices (EICP) and the Monetary Union index of consumer prices (MUICP)
   which will be main indicator for monitoring the success of the price stability policy of the
    future European Central Bank (ECB).
                                        ZC
 ---pagebreak--- 5. The reasons for requiring the domestic concept to be used are as follows. The purpose of
    the HICP is to provide the measure for the price stability criterion and to serve as the basis
    for the future MUICP. The objective is to measure the price changes within each of the
    territories of the individual Member States rather than the price changes affecting selected
    households, such as resident households. The price changes which need to be measured
    within the territory of a Member State include those affecting foreign visitors and exclude
    those affecting residents whilst in a foreign country. Therefore, for the purpose of
    measuring convergence, the domestic concept should be used. Additionally, for the
    purpose of stage III of EMU, the European Central Bank (ECB) will have to focus on the
    MUICP. The objective of the ECB is to maintain price stability in the Euro area, and the
    MUICP will be the main indicator for monitoring the success of the stability policy.
    Therefore it is necessary to have a coinciding definition of the Euro area and the area to
    which the MUICP relates. This property is fulfilled by the domestic concept.
6. The expenditure of people living in institutional households, for example in retirement
    homes, should be included for the following reason. The coverage of the HICP is defined
    as those goods and services which are included in household final monetary consumption
    expenditure. The household sector includes people living in institutions and therefore their
    expenditure should be included in the weights of the HICP. As a result of the demographic
    changes in the EU the expenditure of people living in institutional households, especially in
    retirement homes, is of increasing importance and should therefore not be neglected in a
    measure of consumer price inflation.
7. The draft regulation only requires extensions to the coverage where non-comparability
    would exist if the extension did not occur. It defines the complete set of households which
    the HICP should cover. In effect this is all households: rich and poor; rural and urban,
    resident or non-resident; private and institutional households. However the draft regulation
    allows a portion of these households to be excluded from a sub-index if the expenditure of
    that portion on items in that particular sub-index is not significant. In this context "not
    significant" is defined as less than one part per thousand of the total expenditure covered
    by the HICP. The portion of households which may be excluded can be made up of any
    type of households, for example institutional households and foreign visitors together, or
    foreign visitors alone.
8    The HICPs of the Member States currently cover more than 90% of "household final
    monetary consumption expenditure". The remaining 10% will be added by December 1999.
    4% refers to the geographic and population coverage of the HICP. The remaining 6%
    refers to goods and services to be added in December 1998 and December 1999.
    Consultation is proceeding in parallel on a draft regulation defining a stepwise procedure
    on how and when to include the additional goods and services.
9. The HICP Working Party1 and its Task Forces have spent many hours in numerous
    meetings over two years discussing the geographic and population coverage of the HICP.
    The proposal has obtained the agreement of almost all members of the HICP Working
    Party including the main users, DG II and the EMI2. They emphasised that a harmonized
    definition of the geographic and population coverage of the HICP was required for the
    purpose of achieving comparability and essential for assuring that the there would be no
1
  Group of experts
2
  However, the EMI has not been formally consulted
                                             ZP[
 ---pagebreak--- gaps or double counting in the coverage of the Monetary Union index of consumer prices
(MUICP) which needs to be calculated from January 1999 as the main indicator for
monitoring the price stability policy of the ECB.
                                       Z %
 ---pagebreak---                                            Proposai for
                       COUNCIL REGULATION (EC) No [xx/98]
                                             of [date]
                            amending Regulation (EC) No 1749/96
                 concerning the geographic and population coverage
                      of 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 prices1, and in particular Articles 4 and 5(3) thereof,
Having regard to the proposal from the Commission,
After consulting the European Monetary Institute,
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; the requirement to produce HICPs in no way puts in question the right of
Member States to publish their national, non-harmonised, inflation indices, which they may
wish to use for national policy purposes;
Whereas Commission Regulation (EC) No 1749/962 set down the initial coverage for HICPs
that was restricted to those goods and services covered by all or most national Consumer
Prices Indices (CPIs);
Whereas Council Regulation (EC) No [xx/98] amending Commission Regulation (EC) No
1749/963 defined the coverage of the HICP as those goods and services which are included
in household final monetary consumption expenditure;
Whereas Article 3 of Regulation (EC) No 2494/95 requires that the HICP should be based on
the prices of goods and services available for purchase in the economic territory of the
Member State for the purposes of directly satisfying consumer needs; whereas the weights of
the HICP require a harmonized definition of their geographic and population coverage;
Whereas the compilation of the Monetary Union index of consumer prices (MUICP) and the
European index of consumer prices (EICP) requires a harmonized geographic concept for the
HICPs;
     OJ No L 257 of 27.10.1995, p. 1
     OJL229, 10.9.1996, p.3.
     OJ L xxx, [date], p.x.
 ---pagebreak---  Whereas the Statistical Programme Committee (SPC) has not delivered an opinion within the
 time limit laid down by the chairman; whereas in this case following the procedure laid down in
 Article 14 paragraph 2 of Regulation (EC) No 2494/95 the Commission shall, without delay,
 submit to the Council a proposal relating to the measures to be taken;
 HAS ADOPTED THIS REGULATION:
                                                 Article 1
  Sub-paragraph (a2) of Article 2 of Regulation (EC) No 1749/96 is replaced by the following:
 " 'Household final monetary consumption expenditure' is defined as that part of final consumption
 expenditure4 which is incurred:
        - by households5 irrespective of nationality or residence status; and
        - in monetary transactions6; and
        - on the economic territory7 of the Member State; and
        - on goods and services that are used for the direct satisfaction of individual needs or
            wants; and
        - in one or both of the time periods being compared.
 Household final monetary consumption expenditure is specified in Annex lb of the present
 Regulation and follows the definitions laid down in the European System of Accounts (ESA)
  19958."
                                                 Article 2
 In Article 3 of Regulation (EC) No 1749/96 the following third paragraph is added:
 "3. HICPs compiled using sub-index9 weights which reflect final monetary consumption
 expenditure of a sub-set of households10, rather than of all households, shall be deemed
 comparable, where this difference in practice accounts for less than one part in a thousand of the
total expenditure covered by the HICP. Any amendments of the weights necessary to secure
comparability as defined in this paragraph shall be implemented by December 1998 at the latest."
                                                 Article 3
In Annex lb of Regulation (EC) No 1749/96 paragraphs 1 and 2 are replaced by the following:
 "1. The household sector consists of households which include all individuals or groups of
individuals (as defined in ESA 2.76.a and 2.76.b) irrespective of, in particular, the type of area in
which they live, their position in the income distribution and their nationality or residence status.
4
     Annex lb No 4 to 27
-    Annex lb No 1
6
     Annex lb No 3
7
     Annex lb No 2
8
     Council Regulation (EC) No 2223/96 of 25.6.1996, OJ L 310, 13.11.1996
9
     Article 2 of Commission Regulation (EC) No 2214/96 of 20.11.1996, OJ L 296, 21.11.1996, p. 8.
10   Annex lb No 1
                                                    So                                             Paec2
 ---pagebreak--- It includes individuals living in institutional households (as defined in ESA 2.76b). It does not
include businesses.
2. The economic territory is as defined in ESA 2.05 except that the extraterritorial enclaves
situated within the boundaries of the country are included and the territorial enclaves situated in
the rest of the world are excluded."
                                               Article 4
This Regulation shall enter into force on the twentieth day following that of 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
                                            3 ^                                              -Page*
 ---pagebreak---                           FINANCIAL STATEMENT
1. Title of operation
   Council Regulation (EC) amending Regulation (EC) No 1749/96 concerning the
   geographic and population coverage of the Harmonized Index of Consumer Prices.
2. Budget heading involved
   Article B5-604.
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 convergence
          criteria requirements of the Treaty establishing the European Community. Council
         Regulation (EC) No 2494/95 provides the framework for detailed Commission
         Regulations requiring Member States to produce HICPs following concepts
          methods and practices which have been proposed by the Working Party1 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.
         Commission Regulation (EC) No 2454/97 of 10 December 1997 defines minimum
         standards for the quality of the weights used in the computation of the HICP.
         The Commission Decision of 9 September 1996 [ref. No C(96)2452] provides for
         the funding of part of the additional costs to Member States.
   Group of experts
                                    3 cf
 ---pagebreak---          This draft Council Regulation amends Regulation (EC) No 1749/96 with respect to
         the geographic and population coverage of the Harmonized Index of Consumer
         Prices. It proposes a coinciding definition of the Euro area and the area to which
         the Monetary Union index of consumer prices (MUICP) relates, which will be used
         by, among others, the future European Central Bank for the monitoring of inflation
         in the Economic and Monetary Union from January 1999.
         In parallel consultation is proceeding on a draft Council Regulation amending
         Regulation (EC) No 1749/96 with respect to coverage of goods and services of the
         Harmonized Index of Consumer Prices.
   4.2   Period covered and arrangements for renewal
         The 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 and fourth, in December
         1998 and 1999, will also involve substantial resources.
5. Classification of expenditure or revenue
   DNO : CD.
6. Type of expenditure or revenue
   Subvention cofinancing (66.6%) with national administrations;
   Administrative expenditure - see paragraph 10.
7. Financial impact
   7.1  Method of calculating the total cost of the action
        The draft regulation is necessary to achieve comparable measures of inflation,
        and essential for a coinciding definition of the Euro area and the area to which
        the Monetary Union index of consumer prices (MUICP) relates, which will be
        used by, among others, the future European Central Bank for the monitoring of
        inflation in the Economic and Monetary Union from January 1999. However, it
        will involve additional resources in Member States, and in accordance with Article
         13 of Council Regulation (EC) No 2494/95 the Commission (Eurostat) is expected
        to bear two-thirds of these additional costs until the end of the second year of
        implementation of the measures. It is estimated that costs will not exceed 900.000
        Ecu for the implementation of this draft Council Regulation. The costs to the
        Commission of this regulation will therefore not exceed 600.000 Ecu. Some
        Member States are better equipped to handle the necessary system changes than
        others. In accordance with Article 13 Member States are not obliged to
        implement the draft regulation unless the Commission (Eurostat) will bear two-
        thirds of the additional costs
                                            -3.5
 ---pagebreak---    7.2   Breakdown of the cost of the action
         Member States will produce a breakdown of the costs of their action as part of the
         process of agreeing contracts.
8. Fraud prevention measures
   Contractual arrangements with Member States will be set in place to ensure 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 as
         will decisions by the EMI and the Commission as regards both Monetary Union
         and other macro-economic developments.
   9.2   Grounds for the operation
         The Council Regulation should lead to improved reliability and international
         comparability of the CPIs of Member States. It should lead too to a sharing of
         expertise and technological applications on CPI compilation between Member
         States.
        Main factor of uncertainty:
         The Council Regulation provides only a framework within which many technical
         details must be resolved in collaboration with Member States.
   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 provides for a review by November 1997 and again by
        November 1999. The 1997 review has already been sent to the Secretariat General
        of the Commission for submission to the Council of Ministers.
                                      ZH
 ---pagebreak--- 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 account the
    number of staff and additional amounts authorised by the budgetary authority.
    10.1 Effect on the number of posts
        Type of post             Staff to be assigned to                     Source              Duration
                                managing the operation
                              Permanent          Temporary         Existing        Additional     3 years
                                 posts              posts        resources in       resources
                                                                  the DG or
                                                                 department
                                                                  concerned
     Officials or     A           VA                                  VA
      temporary       B            2                                   2
         staff        C            1                                   1
       Other resources             2                                   1
           (experts)
            A-7000
             Total                VA                                  VA
    The annual cost of existing resources is:
            Officials (titles Al, A2, A4, A5) = 682.500 Ecu x 3 years                  = 2.047.500
           Experts (A-1178)                            = 98.000 Ecu x 3 years          = 294.000
                                                               Total                   = 2.341.500
    10.2 Overall financial impact of additional human resources
           none
    10.3 Increase in other administrative expenditure as a result of the operation
                                                                                                      Ecu
                 Budget heading                    Amounts                  Method of calculation
     A - 7031 Working groups of the                  96.000      4 meetings at 8 K Ecu covering
     Statistical Programme Committee                             delegates expenses (x 3 years)
     The costs of the audit missions to ten Member States per year - three days at 120 Ecu
     per day + fares - is estimated at 31.800 Ecu:
           A-701                                          31.800 Ecu x 3 years         = 95.400
 ---pagebreak---          STATEMENT OF IMPACT OF THE PROPOSAL ON
        INDUSTRY AND IN PARTICULAR ON SMALL AND
                              MEDIUM ENTERPRISES
Title of proposal:
Proposal for Council Regulation (EC) amending Regulation (EC) No 1749/96 concerning the
geographic and population coverage of the Harmonized Index of Consumer Prices
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 convergence criteria requirements of the Treaty
     establishing the European Community. HICPs are designed for international comparisons
    of consumer price inflation. They will be used in particular by the European Commission
    and the European Monetary Institute for the assessment of inflation convergence under
    Article 109 (j) of the Treaty establishing the European Community. HICPs will
    subsequently form the basis of the Monetary Union Index of Consumer Prices (MUICP) to
    be used by, among others, the future European 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 following concepts methods and
    practices which have been proposed by the Working Party1 on CPI Harmonization and
    approved by the Statistical Programme Committee following the Regulatory Committee
    procedure. In accordance with Article 5 (3) of the Council Regulation implementing
    measures are necessary for ensuring comparability of HICPs and for maintaining and
    improving their reliability. So far the Commission has adopted three 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.
    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 2494/95. The HICPs
    provide the best statistical basis for international comparisons of consumer price inflation
    and very considerable progress has been made in harmonizing methodologies. However,
  . more work remains to be done to achieve further harmonization of consumer price indices.
   Group of experts
                                             3&
 ---pagebreak---       Article 3 of Council Regulation (EC) No 2494/95 requires that the HICP shall be based on
      the prices of goods and services available for purchase on the economic territory of the
      Member State for the purposes of directly satisfying consumer needs. However, a
      harmonized définition of the geographic and population coverage of the HICP is still
      needed and the draft regulation seeks to provide this. It specifies that the coverage, for the
      calculation of HICP weights, should include all household final monetary consumption
      expenditure which takes place on the economic territory of that Member State. In
      particular the coverage should include expenditure by foreign visitors (the "domestic
      concept") and individuals living in institutions. All private households should also be
      included irrespective of the area in which they live or their position in the income
      distribution. Expenditure incurred for business purposes should be excluded.
      A harmonized definition of the geographic and population coverage of the HICP is
      required for the purpose of achieving comparability and also to avoid gaps or double
      counting in the coverage of the Monetary Union index of consumer prices (MUICP) and
     the European index of consumer prices (EICP).
     The reasons for requiring the domestic concept to be used are as follows. The purpose of
     the HICP is to provide the measure for the price stability criterion and to serve as the basis
     for the future MUICP. The objective is to measure the price changes within each of the
     territories of the individual Member States rather than the price changes affecting selected
     households, such as resident households. The price changes which need to be measured
     within the territory of a Member State include those affecting foreign visitors. Therefore,
     for the purpose of measuring convergence, the domestic concept should be used.
     Additionally, for the purpose of stage III of EMU, the European Central Bank (ECB) will
     have to focus on the MUICP. The objective of the ECB is to maintain price stability in the
     Euro area. Therefore it is necessary to have a coinciding definition of the Euro area and
     the area to which the MUICP relates. This property is fulfilled by the domestic concept.
     The expenditure of people living in institutional households should be included for the
     following reason. The coverage of the HICP is defined as those goods and services which
     are included in household final monetary consumption expenditure. The household sector
     includes people living in institutions, and therefore their expenditure should be included in
     the weights of the HICP.
The impact on business:
2.   Who will be affected by the proposal?
         •    which sector of business
Consumer price indices are compiled using prices and weights. For most Member States the
draft regulation will involve extending the coverage of the information used to calculate the
HICP weights. For example they will have to include expenditure by foreign visitors or
individuals living in institutions such as retirement homes. According to the principle of
subsidiarity it is up to the National Statistical Institutes to decide how and where to collect that
information. To a large extent the data could be obtained from already existing sources such as
tourism statistics. Furthermore, information on people living in institutional households could
be collected from non-profit organisations serving households or the government sector.
         •    which size of business? (what is the concentration of small and medium sized
             firms?)
                                   ^
 ---pagebreak---  The size of the business is only relevant to the extent that the weights should correctly reflect
 the expenditure of all households, including people living in institutional households such as
 retirement homes. According to the principle of subsidiarity, the data sources are selected 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 weights should correctly reflect the
 household monetary consumption expenditure on the whole economic territory of the Member
 States. All Member States of the European Union, Norway and Iceland are concerned.
 3.    What will businesses have to do to comply with the proposal?
 National Statistical Institutes collect the necessary information about the expenditure of all
 households on the economic territory from already existing data sources such as for example
 household budget surveys, tourism statistics, and national accounts. In some cases it might be
 necessary to extend the existing surveys or to collect the information directly from non-profit
 organisations serving households, government agencies, or retirement homes. In general, the
 participation in such surveys is on a voluntary basis.
 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, and will provide the statistical basis for the assessment of inflation convergence under
Article 109 (j) of the Treaty establishing the European Community. In Stage III of EMU, the
HICPs will be used to compile the Monetary Union Index of consumer prices (MUICP), which
will be the indicator for monetary policy of the future 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.
5.    Does the proposal take account of the specific situation of small and medium-sized
      firms (reduced or different requirements etc.)?
According to the principle of subsidiarity, the data sources are defined by the National
Statistical Institutes. They already collect similar information on weights for calculating their
national consumer price indices (CPIs). The HICPs are mainly based on that information.
However, the proposed regulation might involve new data collection in some Member States.
To a large extent the data could be obtained from already existing sources such as tourism
statistics. Furthermore, information on people living in institutional households could be
collected from non-profit organisations serving households or the government. In general,
participation in such surveys is on a voluntary basis.
                                            3^
 ---pagebreak--- Consultation:
6.   List the organisations which have been consulted about the proposal and outline
     their main views.
The European Advisory Committee on Statistical Information in the Economic and Social
Spheres (CELES)2, DG II of the Commission, the European Monetary Institute, and Central
banks of Member States are participating actively in the meetings of the Working Party3 on
CPI Harmonization and the Task Forces. They emphasised that a harmonized definition of the
geographic and population coverage of the HICP was required for the purpose of achieving
comparability and essential for assuring that the there would be no gaps or double counting in
the coverage of the Monetary Union index of consumer prices (MUICP) which needs to be
calculated from January 1999. They are therefore in favour of the proposed regulation.
    established by Council Decision 91/116/EEC; the Committee is made up of representatives from the
    scientific, economic and social fields covering producers and users of statistical information
    Group of experts
                                                 3<5>
 ---pagebreak---   COMPLEMENTARY STATEMENT CONCERNING EFTA
                                   COUNTRIES
Title : Proposal for Council Regulation (EC) amending Regulation (EC) No 1749/96
         concerning the geographic and population coverage of 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 the draft. They intend to compile Harmonized Indices of Consumer Prices
(HICPs) in accordance with this Regulation.
                                         M^ j
 ---pagebreak---  ---pagebreak---  ---pagebreak---                                                                    ISSN 0254-1475
                                                            COM(98) 323 final
                                              DOCUMENTS
EN                                                             10 09 06 17
                                    Catalogue number : CB-C0-98-331-EN-C
                                                             ISBN 92-78-36385-5
Office for Official Publications of the European Communities
L-2985 Luxembourg
                                           Vl