The Economic Affairs Committee launches its short inquiry into the use of RPI with two evidence sessions. Witnesses will be asked if we should stop using the Retail Price Index (RPI) as a measure of inflation, what reasons are there for keeping it, and what impact would changing RPI have on the people and organisations who use it.
Following comments to the Committee by the Governor of the Bank of England in January 2018 that it may be time to transition away from using the retail price index (RPI), as referred to in the Committee's most recent report, Treating Students Fairly: The Economics of Post-School Education, the Economic Affairs Committee of the House of Lords is conducting a short inquiry into the use of RPI. It will conclude before the summer recess.
Tuesday 12 June in Committee Room 1, Palace of WestminsterAt 3.35pm
At 4.35 pm
What are the differences between how RPI and CPI are calculated?
What are the arguments against scrapping RPI altogether?
How much could the Government save in reduced debt interest payments if it switched index-linked gilts onto CPI?
Do you agree with the Chancellor of the Exchequer that moving from RPI to CPI will have a physical cost and will shift the burden of taxation between different groups of taxpayers? Who will be the winners, and who will lose out?
Why do you think RPI is "a poor measure of inflation"?
In the ONS's March 2018 paper on RPI, the National Statistician said that a reason for not changing RPI was that some users valued the continuity of the index, despite its flaws. Can you explain why you think it is more important for a statistic to be consistent than correct
Can you explain the process for making changes to RPI?
What would you like to see happen to RPI?
Staff to the Committee will be in attendance this evening, and we have emailed the details to the members: the unfortunate short notice and the busy parliamentary schedule currently means it may be unlikely for them to attend. We will report back to them on the event nevertheless."
I look forwards to meeting them later.RegardsShaunhttps://notayesmanseconomics.wordpress.com/
David, I agree with you about the witnesses on January 12, who were uniformly poor. The witnesses the week after were much better, particularly Simon Briscoe. They all seemed to agree that there was a need for at least two consumer price series, a household-oriented measure and a macroeconomic measure. The first four all seemed to be looking for one index to rule them all and in the darkness bind them. For example David Johnson said: "…there is no particular reason for using RPI and CPI in different cases. There is no argument there." I don't think Dr. Courtney was the witness I would most have liked to have seen instead of the first four, although he certainly would have provided a corrective to the absolute dismissal of the use of the Carli formula by the witnesses. I was particularly disappointed in Chris Giles as he mentioned the Dutot formula in his testimony but seemed to have no problem with it. I suspect it is still too much used in the UK consumer price series, even though it can generate noisy series as compared to the Jevons particularly for luxury goods. He seemed to understand that well enough when he was a member of the CPIAC. Now he seems to have forgotten all about it.
The HCIs didn't come up at all on January 12, as they surely would have if John Astin, Jill Leyland, or Helen Sands had been called on to testify. Shaun Richards would surely have pointed out that the case for moving from RPIX to the UK HICP as the Bank of England's target inflation indicator was weak, and that it implicitly meant an increase in the target rate of inflation. Also, the Lords would not have been misinformed about the treatment of owner-occupied housing in the RPI, if I had been a witness. It was absurd to say that the accounting approach to OOH used in the RPI was some kind of muddled mix of the payments and user cost approaches. It is a separate variant of the user cost approach, distinct from the opportunity cost approach. It was disappointing that neither of the witnesses from the UKSA seemed to be aware of this. I doubt that it would be good value for the UK taxpayer but I would be happy to appear as a witness before the inquiry if the UK government would pay my travel expenses.