The recently announced April Budget will address “shortcomings” of the Retail Prices Index (RPI), it has been revealed.
Chancellor Sajid Javid said the Government would launch a consultation later this month after experts recommended an overhaul of the system used to measure inflation.
The RPI is used alongside the Consumer Prices Index (CPI) and the Consumer Prices Index including owner-occupiers’ housing costs (CPIH) to measure the rate of inflation in the UK.
However, a report published by the Economic Affairs Committee in 2019 revealed a “statistical error” in RPI which caused it to artificially increase by 0.3 percentage points in 2010.
The error led to a £1 billion annual windfall for index-linked gilt holders, while students, commuters and others lost out as rail fares and interest on student loans soared.
Despite acknowledging the error, the UK Statistics Authority had allegedly refused to correct it.
Commenting on the report, the committee said: “The Committee finds that the UK Statistics Authority is at risk of being in breach of its statutory duties on the publication of statistics, by refusing to correct an error that it openly admits exists in the Retail Prices Index (RPI).
“This is clearly unsatisfactory. But why is the UK Statistics Authority unwilling to fix a statistic that it has admitted openly is flawed?”
A Government spokesperson added: “Today, the Chancellor has written to the chair of the House of Lords Economic Affairs Committee announcing that the joint consultation between the Government and UK Statistics Authority (UKSA) on a proposed change to address the shortcomings in the Retail Prices Index (RPI) will now launch at Budget 2020.”
Click here to read the Economic Affairs Committee’s report on RPI.