Two Parliamentary committees urge statistics watchdog to fix flawed RPI measure ASAP – and call its failure to act ‘untenable’

  • MP Nicky Morgan and Lord Forsyth published a letter to UK Statistics Authority
  • Comes on the back of last month’s Lords report that found flaws in RPI
  • RPI has benefited UK bondholders to the tune of £1bn since 2010 – but left students and commuters out of pocket because it rises faster than the CPI 

George Nixon For Thisismoney.co.uk

Treasury Committee chair Nicky Morgan called the Government's continued cherry picking 'grossly unfair'

Treasury Committee chair Nicky Morgan called the Government's continued cherry picking 'grossly unfair'

Treasury Committee chair Nicky Morgan called the Government’s continued cherry picking ‘grossly unfair’

The heads of two powerful Parliamentary committees have called on the UK Statistics Authority to put pressure on the Chancellor to fix a billion-pound blunder in the way a key measure of UK inflation is calculated.

In a joint letter, Nicky Morgan MP, chair of the Treasury Select Committee, and Lord Forsyth of Drumlean of the House of Lords Economic Affairs Committee, have written to the UKSA’s John Pullinger urging him to end the ‘ridiculous merry-go round’ by fixing a flaw in the Retail Price Index.

The letter follows a report by Lord Forsyth’s committee published last month that found students and rail passengers were being unfairly penalised

This was because of an error that artificially increased the rate of RPI by about 0.3 per cent. It currently stands at 2.7 per cent.

The error was caused by a change in 2010 to the way clothing prices were collected, which has widened the difference between the RPI and the Consumer Prices Index.

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The committee claimed in its report that the Office for National Statistics openly admits the RPI error, but has refused to ask the Chancellor to approve a correction as it believes the Treasury will not want to upset financially index-linked gilt holders, who received a £1billion yearly windfall as a result.

The error has also led to allegations of ‘index-shopping’, where the Government cherry picks the measure that suits it best, using the lower CPI for incomes such as pensions and benefits, and using RPI for outgoings like student loans and train fares.

A £1bn blunder dating back to 2010 in the way RPI is calculated has cost commuters dear. A House of Lords committee called the Government's failure to fix it 'untenable'

A £1bn blunder dating back to 2010 in the way RPI is calculated has cost commuters dear. A House of Lords committee called the Government's failure to fix it 'untenable'

A £1bn blunder dating back to 2010 in the way RPI is calculated has cost commuters dear. A House of Lords committee called the Government’s failure to fix it ‘untenable’

In their letter, the two chairs wrote: ‘We urge you to pay particular attention to the Committee’s conclusions on errors with the RPI.

‘Instead of fixing this error however, you have designated RPI a “legacy measure”, making no further improvements to the index.

‘This is not a tenable position when the index remains in widespread use. The last RPI index-linked gilt matures in 2068. 

‘In continuing to publish a statistic which you openly admit is flawed, we fear you may be in breach of your statutory duty.’

They urged Mr Pullinger ‘to write to the Chancellor seeking consent for such a change as soon as possible.’

Lord Forsyth added: ‘Our January report concluded that by not fixing RPI, the UK Statistics Authority could be in breach of its statutory duty to safeguard official statistics.

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‘The Authority told us they had not asked the Chancellor to approve fixes to RPI because they expected he would say no. 

‘The Treasury said they could not act because no request had been submitted. This is a ridiculous merry-go-round.

‘The UK Statistics Authority should submit a request immediately, and the Chancellor should consent.’

The UKSA is still yet to respond to the Lords committee’s report last month. 



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