The practical difference between RPI and CPI for benefits
Richard has already blogged about the impact of ditching RPI as the measure for indexing benefits.
It provoked me into building a quick spreadsheet model of the difference it would have made since 2000.
If child benefit had been linked to CPI since 2000 instead of RPI it would now be £18.05p for the first child rather than the current £20.30.
Carers’ allowance – paid to people looking after dependents – would now be £5 less at £48.64 a week rather than its current level of £53.90.
The Chancellor today announced that most future benefits would be linked to CPI rather than RPI. In most years CPI is lower than RPI and does not include housing costs. It soon starts to make a difference.
The first table shows the September rates of CPI and RPI. This is the month used for uprating.
|CPI (%)||RPI (%)|
This means that in cash terms benefits would have gone up by 31% since 2000 under RPI, but just 20% under CPI.
The next table shows how the 2000 rate would have been indexed by RPI and CPI. In Sep 09 RPI was negative, this model assumes a freeze in benefits as government’s are unlikely to make actual cuts. The previous government rounded benefits to nearest 5p. This model does not. In some years the previous government increased child benefit more than RPI.
|carers||child benefit 1st child|
|Actual carers’ allowance||Actual child benefit 1st child||upgrade by CPI||upgrade by RPI||upgrade by CPI||upgrade by RPI|