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Responding to the UK statistics authority plan to sabotage the RPI

Published date

On Budget day the Treasury opened a consultation on the UK Statistics Authority’s “recommendation … to address the shortcomings of the RPI”. After a shameful and chaotic series of initiatives, they now plan to sabotage the RPI by imposing on it the methodology of CPIH. There have been calls for the consultation to be postponed for the duration of the coronavirus crisis, but in the absence of a Treasury announcement, we have to plan to respond to the original deadline of 22 April 2020. Trade unionists and other impartial commentators are urged to respond forthrightly to defend the RPI.

As far as many commentators, statisticians and economists are concerned, the RPI remains the most accurate indicator available of changes to the cost of living facing workers and the wider public. In the real world, union members will not need reminding that CPIH is around one percentage point below the RPI. The public will not need reminding that they have been left out of pocket as the government and some businesses have taken advantage of the disarray in inflation measurement.

UKSA and the Lords consultation

The UKSA position is presented as a done deal; the consultation is focused on the timing of the sabotage (2025 or 2030) and is concerned mainly with checking-in with the financial corporations that hold index-linked gilts (generally on behalf of pensioners). For the Treasury and the UKSA know full well the views of the public as well as the statistical experts (beyond the narrow clique deployed to support their own position) from the responses to a series of consultations over the past decade. Their latest initiative is all-the- more remarkable for the contempt with which they have dismissed the latest of these consultations from what amounts to pretty high authority. The UKSA proposal originally came as a response to the recommendations of the distinguished House of Lords Economic Affairs Committee (including two former Chancellors and two ex-bosses of HMT), who published a report (over a year ago) in January 2019 following a written consultation and evidence sessions with key witnesses.

The Committee was categorical:

We disagree with the UK Statistics Authority that RPI does not have the potential to become a good measure of inflation.

They called for the UKSA to “ resume a programme of periodic methodological improvements”.

When the report was issued, the press release was headlined ‘RPI must be fixed’. [1] To fail to make this change would be mean the statistics watchdog was “arguably in breach of its statutory duty to promote and safeguard official statistics”. Conversely they criticised the UKSA preferred CPIH measure, unconvinced by the rental equivalence measure of housing.

These conclusions echo the TUC’s position, submitted to the inquiry and followed up in an oral evidence hearing:


The TUC categorically reject the charge that the RPI is fundamentally flawed. We call for an end to the constant attacks on the integrity of the RPI, and instead for the implementation of a positive initiative to renew the measure so that national statistic status can be restored.

The respected Royal Statistical Society (RSS) state that CPI and CPIH “are an unsatisfactory measure of inflation as it affects British households”.

In claiming their position was supported by the Advisory Panel on Consumer Prices, UKSA misrepresent the panel who went as far as only agreeing the government should fix clothing prices.

Responding to the consultation

The consultation is open from 11 March to 22 April 2020 - Trade unions are encouraged to respond in no uncertain terms. Given the ‘done deal’ nature of the consultation, we suggest that the relevant place to respond is to question 6:

6. Are there any other issues relevant to the proposal the Authority is minded to make of which the Authority or the Chancellor ought to be aware?

The TUC will argue rather than take up the compromise offered by the Lords, UKSA have chosen to disregard their statutory duty to protect the integrity of inflation measurement. Overall, we still see an alternative way forward:

  • The Lords report vindicated Trade Unions’ argument that the RPI is not fundamentally flawed.
  • UKSA decisions appear to be based on protecting the integrity of an official decision rather than on statistical grounds.
  • As with the Royal Statistical Society (RSS), most Trade Unions are generally sympathetic to the idea of two measures of inflation one for uprating purposes and the other for macroeconomic purposes.
  • Grave damage has been done to the credibility of inflation measurements and the integrity of the institutions involved; this comes at a delicate time for the reputation of official bodies.
  • In gaming the inflation measures used for uprating purposes the government and some corporations have exacerbated this situation and disadvantaged different sections of the public. But over time the greatest disadvantage will be to wage earners, who are being inadequately compensated for changes in the cost of living. Even the process of wage negotiation is distorted with discussion side-tracked into the relevant measure of inflation rather than the appropriate increase relative to inflation.
  • The Lords Committee were unequivocal in their call for the clothing problem to be repaired:
    • “Fixing RPI: The present position of the Authority is untenable. Rather than pre-empting the decision of the Chancellor, it should fulfil its statutory duty to promote and safeguard the quality of official statistics and to do that, it should request a fix to the clothing problem.”
  • The Lords also rejected the UKSA position that the formula effect debate was resolved, reporting instead a divergence of opinion. This is a step in the right direction towards Dr. Mark Courtney who has advised that the CPI is likely to understate inflation by more than the RPI overstated inflation. He has recently catalogued the opinion of genuine experts in the field (available on request), to evidence further the invalidity of the UKSA position.
  • The Lords proposal was supported by the Advisory Panel on Consumer Prices but rejected by UKSA and the National Statistician; the published reasoning for this is nonsensical, rejecting a compromise on the tautological grounds that it is not a full solution.
  • In the longer-term we propose an upgrade to bring the RPI up to date. The developments associated with the RSS’s preferred household cost index (HCI) – which is designed explicitly as an uprating rather than macroeconomic measure – might provide an appropriate template (including, for example, more appropriate measures for owner occupiers’ housing costs and student loan repayments).
  • Before this could happen, there would need to be a programme of work to ensure the HCI addressed the formula issue in an unbiased (or least bad) way. This process might be led by the RSS, who have offered valuable advice throughout the process and as an institution have emerged with their credibility and reputation enhanced.
  • Finally, it is hard to judge whether financial interests are playing a part. While the costs of government borrowing would be reduced, the hit will be to pensioners who (still) have RPI-linked pensions. The pension industry is likely to benefit, as reported in the minutes of the January advisory panel “Survey data suggests approximately 20% of pension schemes may lose money as a result of the potential change (i.e. schemes with mainly CPI pension increases). Conversely, there are early indications of support for the changes from some schemes that are expecting to gain from the proposed change (i.e. schemes with mainly RPI pension increases), albeit recognising that their members would receive lower pension increases”.
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