Today, the Treasury and UK Statistics Authority have responded to the joint consultation on reforming the methodology of the Retail Prices Index (RPI). In a report published at the same time as this week's Spending Review, the Chancellor, Rishi Sunak, announced that the RPI will be maintained until 2030, when it will be aligned with the housing cost-based version of the Consumer Prices Index, the CPIH.
In a response to the consultation earlier this year, the RSS made the following points:
- The RPI and CPIH, to which it would be aligned, have quite different purposes: CPIH is a macroeconomic indicator that is good for gauging the general performance of the economy, while RPI is intended to reflect changes in the cost of living. Using a macroeconomic indicator to reflect how prices are changing risks giving people a misleading impression of how prices are changing and undermining confidence in statistics.
- The UKSA is developing an alternative measure of the changing cost of living: the Household Costs Index (HCI). The RPI is much closer in purpose to the HCI than to the CPIH and it would make far more sense to focus on developing the HCI and taking that to ‘National Statistic’ status.
- The decision to align RPI with CPI has been made with unnecessary haste and without taking into account recommendations from either UKSA's stakeholder panel or the key report, Measuring Inflation (January 2019), from the House of Lords Economic Affairs Committee.
'The government's plan to replace RPI with CPIH is a clear case of using the wrong tool for the job,' said RSS chief executive Stian Westlake, as reported by the BBC. 'CPIH is a totally different measure which produces totally different results and it may have negative consequences for consumers, workers and savers.
'As the CPIH is to replace the RPI, then a full review should be conducted to look into what the possible consequences will be, and how to avoid the likely problems.'