EM3661 - Recalculating Profits: Personal and Private Expenditure: Cost of Living Scaling Back

Any computation of personal and private expenditure which extends over a number of years should take into account the increase in the cost of living.

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By its very nature a cost of living index can provide no more than a general test. While the Retail Prices Index is based on the prices of a range of staple foods, fuel, services etc on which an average family might be expected to incur expenditure, it may reflect a pattern of spending quite different from that of the particular family under review. It is, however, well known that, whatever the pattern of spending, there is normally an increase year on year in the cost of living for everyone. This increase should be reflected in any computations which extend over a period of years.