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Political pressure grows over switch to CPI

The Government is facing mounting pressure from MPs to reconsider its decision to switch pension indexation from the retail price index to the consumer price index.

Last week, Labour MP for Glasgow North-west John Robertson tabled an early-day motion highlighting the risks of the prop-osal. Robertson noted that bec-ause RPI tends to be lower than CPI, the change will affect the incomes of pensioners and other vulnerable groups. He called on the Government to postpone the reform until the appropriateness of CPI as a measure of price inc-reases borne by pensioner households can be fully evaluated.

On Monday, 13 MPs had signed the EDM, including Lab-our MPs Anne Begg and Dennis Skinner and Liberal Democrat Bob Russell.

The Civil Service Pensioners’ Alliance held a conference on Tuesday to oppose the change, which it claims will cost public and private sector pension savers £250bn over the next 40 years.

Royal Statistical Society vicepresident Jill Leyland has also urged the Government to reth-ink its proposal.

She says: “We believe the CPI, while acceptable for some macroeconomic purposes, does not have appropriate coverage for indexation and related purposes such as wage negotiations. Against this, it is quite possible the RPI overstates inflation. We would like coverage and methodology of the indices to be reviewed.

While much attention has focused on the exclusion of owner-occupied housing from the CPI, this is not the only issue.”

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  1. Surely john Robertson has his indices the wrong way round! RPI tends to be HIGHER than CPI; by an average of between 0.5% and 1% per annum. Through the Pensions (Increases) Act of 1971, amended through the years, public sector pension changes are predicated on those recorded for State benefits including the basic State Pension (BSP). It is proposed that the BSP is to be indexed by the greatest of CPI, 2.5% or earnings each year. If the government proposes to sever this link with BSP etc then legislation will presumably be required which trade unions and interested parties should strenuously oppose. Earnings, in the long run, should outperform prices rendering the RPI/CPI argument redundant.

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