A single pound in 1750 may be worth more than this entire roll of 50 pound notes.
The U.K. Historical Price converter uses the Retail Prices Index to calculate a price comparison between money of different dates. So for instance, if something cost £100 in 1900 it would
cost £11,000 in 2013.
To use the Historical Price Converter simply enter a value and use the pull-down menus to choose a starting and ending date and the converter will tell you the value on the other date.
It will convert in either direction so if you want to know the equivalent value of £ 100 from 2013 to 1945 it will do that as well. Simply change the top year to 2013 and the bottom year to 1945 and you find that you would only need £2.60 in 1945 to be the equivalent of £100 in 2013! And between 1750 and the current level prices increased 150 times.
“Put another way, the index shows that one decimal penny in 1750 would have had greater purchasing power than one pound in 2003.”
Note that in the late 1700’s it took roughly £4.25 to buy an ounce of gold or £1 would buy a little less than 1/4 ounce of gold! So if gold is currently around £820 / ounce the price of
gold has increased by roughly 193 times or more precisely the value of the money has decreased by that much.
The Retail Prices Index (RPI)
The United Kingdom uses two different forms of measurement to calculate price inflation and the change in the value of the British Pound. The first method is called the Retail Prices Index (RPI) and it was instituted in June of 1947.
The Consumer Price Index (CPI)
The second measurement is called the Consumer Price Index (CPI) which was introduced in 1996. The CPI tracks prices of 600 different goods from 120,000 different retail outlets. The CPI generally results in a lower inflation number than the RPI because it uses a “geometric mean” rather than an “arithmetic mean” as its method of calculation. For more information on the
Geometric Mean see: Inflation by Decade.
One advantage of the CPI over the RPI is that when using the geometric mean if prices go up and then return to their previous level the index will also return to its previous level, which is not the case with the arithmetic mean in the RPI.
The RPI is still used in calculating some price escalations such as private corporate wage negotiations. However, it is no longer used as the basis for indexing pensions for government employees, rather the CPI is now used. However, the RPI is still used for various other government purposes such as calculating the amount of interest payable on index-linked securities including index-linked gilts Gilt-edged securities and social housing rent increases and we use it here because it is a constant measure all the way back to 1751.