Call to change method to measure RPI inflation
AN expert on indexes reported that a method used to calculate Britain’s RPI inflation measure – key to many pay and pension rises – should be changed as it yields overly high figures, and the country’s statistics office began consultations on reform.
Three of the four proposals made by the Office for National Statistics (ONS) in the public consultation it launched yesterday would lead to a retail price index that is closer to the consumer price index (CPI), which is typically lower. The remaining suggestion is for no change.
Aligning the long-standing RPI more closely to the newer CPI could save Chancellor of the Exchequer George Osborne £3bn a year in debt interest payments, but it risks alienating bondholders as RPI is used to calculate returns on index-linked gilts.
RPI is used to calculate some private sector annual pay settlements and rises for many private pensions among other con- tracts.