Socialist Worker

Squeezing us for more

Issue No. 2345

Hundreds of thousands of workers could lose billions more pounds from their pensions and pay because of a shift in inflation measures.

The Office for National Statistics has downgraded the Retail Price Index (RPI) measure of inflation. 

It says it does not meet high enough standards to be treated as a national statistic.

The RPI rate of inflation is usually higher than the Tories’ preferred Consumer Price Index (CPI) measure. Both are based on the cost of around 650 goods and services.

But CPI excludes housing costs and council tax, and is calculated in a different way to RPI. 

So in February the RPI rate of inflation stood at 3.2 percent while CPI was 2.8 percent.

Defined benefit pension schemes and pay claims are based around measures of inflation. 

If schemes that currently use RPI shift to CPI, workers will be much worse off.

When the government announced in 2010 that private pension providers could use CPI instead of RPI, accountants KPMG estimated it would save firms £100 billion.

All measures of inflation are arbitrary to a degree and there hasn’t always been consensus on which to use. 

No measure reflects the real cost of living for ordinary people. 

But the Tories want to use the lowest possible measure to squeeze more from us. 

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What We Think
Thu 21 Mar 2013, 15:42 GMT
Issue No. 2345
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