Consultation on the Reform to Retail Prices Index Methodology

Closes 21 Aug 2020

Opened 11 Mar 2020

Overview

The UK Statistics Authority (the Authority) and HM Treasury are jointly consulting on reforming the methodology of the Retail Prices Index (RPI). The RPI is the oldest measure of inflation in the UK and is used widely across the economy and in financial contracts. However, it has a number of shortcomings meaning that it has at times greatly overestimated, and at other times underestimated the rate of inflation.

The Authority is independent from government and responsible for official statistics on inflation measures in the UK. The Authority has recommended changes to the RPI, but in certain circumstances, changes to RPI require the consent of the Chancellor of the Exchequer before they can be implemented. The requirement to seek the Chancellor's consent expires in 2030.

Why we are consulting

In March 2019, the Authority made a recommendation to the then Chancellor to address all of the shortcomings of RPI. The then Chancellor stated that he was unable to consent to the introduction of the change proposed based on the available information at the time. Instead, the then Chancellor announced in September 2019 that he would consult publicly on whether this change should be made at a date other than 2030, and if so when between 2025 and 2030.

What we are asking

The Authority

The Authority has a proposed technical approach that they intend to take to transition between the current and new methods and data sources of RPI. As part of this consultation, the Authority is seeking responses on their proposed approach.

The Chancellor

The Chancellor's limited role in changes to the measurement of RPI stem from its use as the reference rate for certain index-linked gilts. The framework for this role is set out in legislation. As a result, the Chancellor’s decision on consent may only consider factors related to the government’s issues of index-linked gilts.

Therefore, the Chancellor is seeking responses on the potential impact of the Authority’s proposal on the holders of index-linked gilts, and potential broader impacts on the index-linked gilt market. Specifically, the Chancellor will seek views on whether the Authority’s proposal should be made for a date other than 2030 and, if so, when between 2025 and 2030.  

The Authority and the Government

The Authority and the Government are also mindful that they do not have full sight of the use of RPI in the economy and financial contracts. Therefore, this consultation welcomes evidence on the use of RPI and its sub-indices more widely to inform future policy decisions. 

How to respond

Please read our consultation document before responding. Excerpts relating to each question are available under "essential information" in the online survey

We encourage you to respond online wherever possible. However, responses in writing or email will be accepted via:

RPIConsultation@hmtreasury.gov.uk

RPI Consultation Team
HM Treasury
1 Horse Guards Road
London
SW1A 2HQ
.

RPI Consultation Team
Room 2.001
Office for National Statistics
Cardiff Road
Newport
NP10 8XG

On 16 April 2020 the UK Statistics Authority and HM Treasury announced that they would be extending the time period for this consultation to 21 August 2020, in light of the Covid-19 pandemic. The Authority will resume proactive engagement, including events, as circumstances allow. A response to the consultation will now be published in Autumn 2020. An exchange of letters between the Chancellor of the Exchequer and Sir David Norgrove, Chair of the UK Statistics Authority on this matter is available here.

Give Us Your Views

Audiences

  • Analysts
  • Academics
  • Businesses
  • Charities
  • Economists
  • Government
  • Local government
  • Policy managers
  • Politicians
  • Researchers
  • Statisticians
  • Think tanks

Interests

  • Business
  • Economy
  • Statistics
  • Data
  • Formal consultations