How outdated inflation sums cost us millions

Officials demand that RPI is killed off

MILLIONS of families are being hit by eye-watering price rises on rail fares and student loan repayments because the Government is using a widely discredited measure of inflation, officials have warned

A report by the Office for National Statistics (ONS) yesterday found that the Retail Prices Index (RPI), which is also used to set a string of taxes, including tobacco and alcohol duties, ‘is likely to overstate inflation’ – resulting in unfair increases in many living costs.

The ONS said some items used to measure the rate – thought to include women’s vests and strappy tops – have shown ‘implausible levels of inflation’ since 2010. One item of clothing, it said, rose 328pc over the past eight years on the RPI measure but by just 36pc according to the formula behind the preferred Consumer Price Index (CPI).

RPI also dictates increases in many private sector pensions and the interest paid on around £400bn of Government debt.

RPI was replaced as an official statistic in 2013 by the CPI, which is seen as a fairer reflection of living costs and is typically a percentage point lower. But it continues to be widely used by the Government, regulators and private companies.

In a stark message to ministers, John Pullinger, national statistician at the ONS, called for RPI to be abandoned. He said: ‘We do not think it is a good measure of inflation and discourage its use.

‘There are other, better measures available and any use of RPI over these far superior alternatives should be closely scrutinised.’

Sir David Norgrove, chairman of the UK Statistics Authority watchdog, said: ‘The RPI is a poor measure of inflation.

‘With this strong evidence for the deficiencies, I remain concerned by its widespread use.

‘If people want to measure changing prices they should use other indices which do not suffer the technical weaknesses of the RPI.’ Consumer groups agreed. Steve Chambers, at the Campaign For Better Transport, said: ‘The Government needs to stop using RPI.

‘The ONS stopped using it as a measure of inflation in 2013 because it consistently overestimates. Now it’s time to apply CPI to rail fare increases.

‘Using the CPI to set rail fare increases would have little impact on railway revenues, but it would save passengers money and bring fares into line with things like pensions.’