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U.S. Markets

UK will not phase out RPI inflation measure before 2030

Britain's Chancellor of the Exchequer Rishi Sunak leaves Downing Street, in London, Britain, November 25, 2020. REUTERS/Henry Nicholls

LONDON (Reuters) - Britain will not bring the Retail Prices Index (RPI) measure of inflation in line with the typically lower Consumer Prices Index before 2030.

British government statisticians recommended last year that the government immediately bring RPI in line with the CPIH measure of inflation - a version of CPI which includes extra estimates of housing costs.

The finance ministry rejected a sudden change last year, but said it would consult on whether to phase in a change at some point between 2025 and 2030.

On Wednesday, finance minister Rishi Sunak announced he would not approve the change before 2030

“The Chancellor has announced that while he sees the statistical arguments of UKSA’s (UK Statistics Authority) intended approach to reform, in order to minimise the impact of reform on the holders of index-linked gilts, he will be unable to offer his consent to the implementation of such a proposal before the maturity of the final specific index-linked gilt in 2030,” the government said in a statement.

British statisticians have discouraged the use of RPI since 2013, saying it typically overstates inflation, but it remains widely used to calculate interest payments on index-linked bonds and student loans, as well as annual increases in some pensions, rail fares and other commercial contracts.

Reporting by David Milliken; Editing by William James

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