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Labour says Webb has no proof for CPI switch claim

Reeves: ’Cost-saving meassure’

Shadow pensions minister Rachel Reeves has hit out at the Government’s decision to switch the indexation for pension increases from the retail price index to the consumer price index.

In July, pensions minister Steve Webb announced plans to change the measure for future revaluation from 2011.

However, following widespread industry concern that scheme legislation could have “hard-wired” RPI into the scheme rules of many sponsor companies, Webb confirmed the DWP would consult on the detail of the switch.

Speaking at a Professional Pensions conference last week, Reeves said Labour would stand against a permanent change in the pension inflation measure. She criticised the Government for failing to properly consult on the appropriateness of CPI for pensioners before the announcement.

She said: “There has been a lot of announcements about policy that do not have the detail in there.

“I heard Steve Webb say that CPI is a better measure of inflation for pensioners but he has not consulted the Office for National Statistics on that.
“It is easier to say it is a better measure than it is to prove it. It is very clear that it is a cost-saving policy.”

However, Reeves indicated Labour would be willing to consider an alternative policy that would see increases measured using the CPI until 2015. She also revealed Labour was supportive of a universal state pension in principle, although she insisted the contributory principle should remain intact.

Reeves said: “We do not want the contributory principle removed. We think it is right that those who pay more in should get something back.”


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There are 3 comments at the moment, we would love to hear your opinion too.

  1. If the government needs more money then they should raise taxes. Taxes can go down but changing the indexation for pensioners means that they will still be paying long after the current problems are long forgotten about.

    It is simply wrong for the government to steal peoples hard earned pensions. But then they know that they can hardly go on strike and are unlikely to riot in London. Next they will be stealing benefits from the disabled. Sorry I forgot they are already doing that.

  2. Again no one has cottoned on to the announcement from the ONS that the method for evaluating CPI is being changed to take into account housing costs? So in future the diffference between CPI and RPI will not be that big (ingoring the fact that for over a year CPI was higher than RPI anyway on the old basis).

    Nice to see that Labour also admit they would have made the change for at least 5 years too

  3. CPI uses a geometric average, not an arithmetical one, which means that the lowest common denominator in each item category is used to calculate inflation. It assumes that people will always switch to the lowest possible brands/shops – which is of course utter nonsense as otherwise noone would buy from Waitrose or M&S.

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