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Pay and pensions threat if government scraps RPI measure of inflation

Paloma Kubiak
Written By:
Paloma Kubiak

Union leaders are pleading with the government not to scrap the RPI measure of inflation as they warn millions of people will see their pay and pensions impacted by the move.

Currently, the government uses a mix of inflation measures – RPI (Retail Prices Index), Consumer Prices Index (CPI) and the newer Consumer Prices Index including owner occupiers’ housing costs (CPIH) – for different policy areas.

Statisticians and politicians have long called for one single, more accurate measure and the government is now expected to make a decision on the future of RPI alongside the Spending Review on 25 November 2020.

However, a cohort of union leaders have published a joint statement urging the government not to get rid of the RPI inflation measure as it will hit workers’ pay and pensions.

They claim workers could be left £14,000 poorer by the move.

The statement reads: “We are deeply concerned by the imminent threat to scrap the RPI measure of inflation.

“This is not a technical issue. Getting rid of RPI would affect millions of working people – both in terms of pay and pensions.

“Two-thirds of private sector schemes are still uprated by RPI. Shifting to the proposed CPIH measure would leave the average male worker with a private sector pension £11,000 worse-off in retirement. And it would leave the average woman worker on a private sector scheme £14,000 poorer. That is not right.

“And if future pay bargaining moves from RPI to CPIH this could reduce pay rises by more than £350 for the average full-time UK worker.”

The statement goes on to note that RPI is not perfect, but it” remains the best measure for living costs and would be straight forward to modernise”.

“As has been shown across Europe it would be perfectly possible to have RPI existing in parallel to CPIH (​or CPI) and have the latter measure focus on guiding monetary policy.

“We are disappointed that expert calls to retain the RPI have been repeatedly ignored. The Royal Statistical Society and House of Lords Economic Affairs ​Committee have both presented compelling evidence for keeping it.

“We urge the government to listen to these bodies and to unions. Scrapping RPI will hit workers in the pay packet and make it harder for them to have dignity in retirement.

“And it will damage the reputation of inflation measurement in the UK.”

The letter is signed by Frances O’Grady, general secretary, TUC; Dave Prentis, general secretary, UNISON; Len McCluskey, general secretary, Unite; Warren Kenny, acting general secretary, GMB; Dave Ward, general secretary, CWU; Dave Penman, general secretary, FDA; Steve Gillan, general secretary, POA; Mick Cash, general secretary, RMT; Manuel Cortes, General Secretary, TSSA; Steve Jamieson, general secretary, College of Podiatry; Dr Paul Donaldson, general secretary, HCSA; Dilwyn Roberts-Young, general secretary, National Union of Teachers Wales and Brian Strutton, general secretary, BALPA.