Comments on: ONS downgrades the Retail Price Index

By: Measuring Inflation – the government faces authoritative criticism | ToUChstone blog: A public policy blog from the TUC

Thu, 02 Sep 2010 17:07:34 +0000

[...] The Royal Statistical Society has written to the UK Statistics Authority to call for a comprehensive review of inflation measures. The letter, from RSS President David Hand to Sir Michael Scholar (the Chair of the UK Statistics Authority) expresses concern about the way in which the Office for National Statistics concentrates on the Consumer Price Index, even though it is not the best index for all purposes – such as wage negotiations, where it is “not ideal.” The letter raises concerns about the way in which the ONS monthly inflation press notice now only headlines the CPI, leaving the Retail Price Index to the inside pages (a point we’ve also raised). [...]

By: Jonathan Green

Jonathan Green — Thu, 15 Jul 2010 08:58:36 +0000

I think that it is an extremely worrying development, especially in light of the recent budget. The linkage of benefits to CPI rather than RPI shows that the government is willing to save money from the poorest in society to cut the deficit. The argument was used that housing costs do not have the same impact for those on benefits, it is only a small hop and skip to the development of an argument that core CPI should be the measure used for uprating benefits (pensions?). I am not saying this is going to happen but it is worrying. This raises a secondary issue, why have ONS done it. The explanatory notes says it follows feedback from users, with the next review planned in October. We should all be paying more attention to the outputs from organisations like ONS especially in light of the fiasco over the OBR budget forecasts.

Jonathan

By: Richard

Richard — Wed, 14 Jul 2010 13:47:42 +0000

Dear Jonathan,

Many trades unionists will recognise ‘core inflation’ as a Treasury obsession for many years when Pay Review Bodies are stting public sector wages; emphasising ‘core CPI’ may have a similar purpose – it’s useful for holding down wages. What do you think?

Richard

By: Jonathan Green

Jonathan Green — Wed, 14 Jul 2010 07:55:25 +0000

Thanks for that post Richard, what do you make of the greater prominance given to “core CPI” in the commentary?

Jonathan

By: Richard

Richard — Wed, 14 Jul 2010 07:38:10 +0000

Dear Squeeze,

House prices may not go up but interest rates may and rents are very likely to rise. There are reasons other than the inclusion/exclusion of housing costs: see Bryn’s post for why the Treasury expects using CPI to knock 0.5 per cent off the rate regardless.

If the CPI were changed to include housing costs that would obviously be a good thing; ity doesn’t look very likely.

Yes the discussion of RPI begins on page 6, not 16, apologies for the error.

Yours,

Richard

By: The Squeeze

The Squeeze — Tue, 13 Jul 2010 22:09:09 +0000

If the major difference between CPI and RPI is housing costs, what on Earth makes you think housing costs are going to go up over the next decade?

Everything points to the next leg of the Japan-style crash some of us were warning about during the heady days of the boom!

PS. Boy George replied to Mervyn’s excuses letter in May saying he wanted housing costs included in CPI.

PPS. RPI coverage starts on page 6.

By: Richard Exell

Richard Exell — Tue, 13 Jul 2010 13:44:12 +0000

Dear Allan,

I certainly agree that even RPI might under-estimate the increases needed by pensioners and benefit recipients. See my blog at: http://www.touchstoneblog.org.uk/2010/07/benefits-leave-people-in-poverty-and-government-policy-will-make-this-worse/

Richard

By: Allan David Cliff Warner

Allan David Cliff Warner — Tue, 13 Jul 2010 13:27:56 +0000

Please see my response to Nigel Stanleys’ blog on linking private pensions to the CPI. I would welcome your thoughts on my reply to to Nigel Stanleys’ blog also.

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Tue, 13 Jul 2010 12:54:37 +0000

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