Government urged to ditch outdated RPI

Claire Dodd

Claire Dodd

02 August 2017

The ALMR has backed claims by the UK’s Office for National Statistics (ONS) that the retail price index (PRI) be ditched as a measure of inflation.

It has called on the government to bring forward its 2020 switch to the consumer price index (CPIH) for business rates to help reduce burdens for hospitality businesses. It claims the switch could save eating and drinking out businesses around £40 million.

RPI, which is calculated on the rate of change of prices for goods and services, includes some costs excluded from CPI such as council tax, and mortgage interest payments. Unlike CPIH it also excludes high earners and pensioner households. RPI has not been an official UK statistic since 2013 as the UK Statistics Authority declared it not to meet international standards.

The RPI is a flawed measure of inflation with serious shortcomings and we do not recommend its use, Jonathan Athow

Earlier this week the ONS said CPIH (which also includes a measure of owner occupiers' housing costs) was now its lead measure of inflation, as it offers the most comprehensive picture of how prices are changing in the economy.

'This is an important step in our plans to improve the UK’s inflation statistics,' ONS director general Jonathan Athow said. 'We are building a suite of measures as an alternative to the RPI. We will continue to produce RPI for legacy uses. However, the RPI is a flawed measure of inflation with serious shortcomings and we do not recommend its use.'

ALMR chief executive Kate Nicholls added: 'The ALMR has repeatedly called for the introduction of CPIH for businesses rates and a move away from the current, unworkable system. The government’s own statistics body agrees that the current system of using RPI is totally discredited and only increases costs on employers.

We need a move from RPI to CPIH in this parliament in order to support hardworking businesses and eradicate unmerited and unaffordable cost burdens, Kate Nicholls

'The government’s plan to switch to CPIH in 2020 is not soon enough and, given the statements of the ONS and spiralling rates costs for businesses, must take action immediately. We need a move from RPI to CPI in this parliament in order to support hardworking businesses and eradicate unmerited and unaffordable cost burdens that are stifling investment and employment.

'This simple switch could help minimise inflationary pressures in the supply chain at a time of considerable economic and political uncertainty for the UK.

'This statement by the ONS, that RPI is unfit for purpose, validates what we have been saying to the government for years. We need action by the government now, not in 2020, if eating and drinking out venues are to continue to grow.'

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