changes to the retail price index (RPI) of inflation

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Dear Colleagues,

Changes to the Retail Price Index (RPI) of inflation

The Office of National Statistics (ONS) recently conducted a consultation exercise over proposals to change the way that RPI is calculated. In their submission to the consultation (which RMT supported) TUC argued against introducing a new RPIJ index.

As well as impacting on private sector pension schemes which use RPI, the proposed changes could also have a detrimental impact upon pay settlements which have always relied on RPI indexation to calculate increases.

The ONS has announced three recommendations:

1. RPI will remain unchanged for ‘long-term indexation and for index-linked gilts and bonds.’

2. A new RPI based index, RPIJ will be introduced from March 2013 which will use the controversial ‘Jevons’ index and is replacing the ‘Carli’ index which the ONS held responsible for the difference between CPI and RPI.

3. Improvements to the measurement of private housing rents for the purposes of RPI calculation, to be introduced by March 2013, in time for calculating the February 2013 RPI rate.

The union is concerned that the second recommendation has the potential to undermine the value of pay settlements. The ONS is silent on how the new RPIJ index will be used but (in recommendation 1 above) restrict the use of the traditional RPI to long term indexation (pensions) and index linked gilts and bonds. This leaves open the possibility that employers might use the RPIJ in pay negotiations and be assured that the union will campaign strongly against any such attack on the value of your pay.

Your union’s negotiators will continue to use RPI in all pay talks with employers and I will keep you informed of any further developments in this matter.

Yours sincerely

R. Crow

General Secretary