Treasury And Economic Affairs Committees Call For Flawed Inflation Measure Fix

The two committees have written to the UK Statistics Authority (UKSA) to urge the Chancellor to allow statistical errors in the RPI calculations to be corrected.

The Economic Affairs Committee said last month that statistical errors in the formula to calculate RPI accounted for 0.3 percentage points of the 0.8ppt it usually exceeds Consumer Price Inflation (CPI) by.

The statistical errors lead to a £1bn yearly windfall for index-linked gilt holders as RPI is the measure used to repay government bonds.

Feeling the pinch: UK inflation on the rise

Treasury Select Committee chair Nicky Morgan MP commented: "As the Treasury Committee has concluded in numerous reports and statements over the years, RPI is a flawed measure of inflation, and it is absurd for the Government to continue to use it.

"It appears grossly unfair that government formulae affecting people's incomes, such as pensions and benefits, often use CPI, whereas formulae affecting outgoings, including student loans, often use RPI, which typically gives a higher rate of inflation.

"The Committee has previously urged the Government to abandon the use of RPI, which has been de-designated as a national statistic. Failing this, the Chancellor should at least consent to UKSA correcting the known errors in the RPI formula."