RPI to CPI Early Day Motion 1032

Ripoff_2

Stargazer57 you say "Now you can pull the wool over the eyes of posters on this board by ignoring these arguments, but if you don't deal with them when writing to MPs your letters will lose impact because most MPs will be aware of these points."



Please don't accuse me of pulling the wool over anybody's eyes, it's the Government that is trying to do that.

The fact is the Government is changing to a measure that it knows is fundamentally flawed, they have made no case that there is a problem with RPI. They have not said they would alter both RPI and CPI to correct any anomalies, all they have said is that they are moving to a measure that they already know is flawed.

You can't then argue that just because there might be a debate as to the correct mean that it is therefore alright to move to a flawed measure without then correcting both measures, if that is the case.

As it stands the Government are changing the indexation without correcting any errors that may or may not be there.

I have no problem with moving to a measure that represents the true inflation measure that we can all trust and know it is accurate but I do have a problem of moving to a measure that is known to be flawed and inaccurate.

The professionals recognise that of CPI irrespective of what you are highlighting here. The fact is CPI is not and has never been the UK Domestic inflation rate and as it stands it does not represent the true inflation figure.

Regarding your second point, you are not seriously saying that pensioners should leave their homes because Council Tax increases have not been included in the inflation indexing and because of that then they should move home because they can no longer afford to live in that home are you? If you are then I give up and will agree to differ.

cvd

the conclusion, of the professionals at the ONS and UKSA, is that the geometric mean is a better method,

You are pulling the wool over peoples eyes. It says no such thing.
I assume you are referring to this sentence:

"The New Inflation Target presents ONS’s views on the respective merits of the CPI and the RPI as measures of inflation. It explains why ONS prefers the CPI measure;"

but that is about using CPI as a measure of macroeconomic inflation and not as a compensation index.

There is a difference between a macroeconomic measure of inflation and a compensation index.
Nobody is disputing that the CPI is a sensible measure of macroeconomic inflation - except the Conservatives when Labour began to use it. What is being discussed for pensions is a compensation index.
The key sentence is
"ONS presents mixed evidence on the respective merits of the CPI and RPI as compensation indices."

And that is because there is no right answer to this problem. It all depends....
Interestingly, the sentence above is the most the UK Statistics Authority felt it could say after being directed by Osborne and Webb to find evidence in favour of the CPI.

They could have quoted this from the ONS which was written when the CPI was introduced and explained the differences between the two measures:

"The HICP and the RPI differ in their purpose and construction. The RPI is the best indicator of
consumer price inflation in the United Kingdom. The HICP is used for international comparisons
of inflation in Europe."

Source: http://www.statistics.gov.uk/articles/economic_trends/HICP0298.pdf

But clearly that would not have pleased their employers.

I know lots of people who have avoided Council Tax increases. Some have moved to a smaller house, others have changed area.

Osborne has decided that we need a CPIH, that is CPI with housing costs added. It will almost certainly be a new index in addition to CPI because CPI is decided by international agreement between all countries in the EU. Will Britain achieve yet another world lead - the largest number of official inflation indices??

markr007

A few things from reading some of these posts:

- The formula affect is more like 0.5% rather than 1% difference.
- The remaining difference is mostly housing costs.
- The geometric mean effectively assumes that when prices rise people buy more of cheaper brands than before which seems inherently sensible.
- CPI will likely include some housing costs in the future reducing the gap.
- The basket of goods in RPI is regularly reviewed and has had many changes in the past without uproar.
- Trustees are generally powerless to keep benefits at RPI in private sector DB if legislation is referred to as other docs state rules are overriding unless employer consent given.
- My experience of DB schemes is that it applies automatically fir 90% of schemes for deferred pension increases but on 10-20% of schemes fir pensioners. So it doesn't impact on the members it is supposedly a better measure for!
- Overall I don't believe the change to CPI with some housing costs is unreasonable but that the process of implementing it has been done too fast without quite enough thought.

Mark

RichandJ

markr007 wrote: »

A few things from reading some of these posts:

- The formula affect is more like 0.5% rather than 1% difference.
- The remaining difference is mostly housing costs.
- The geometric mean effectively assumes that when prices rise people buy more of cheaper brands than before which seems inherently sensible.
- CPI will likely include some housing costs in the future reducing the gap.
- The basket of goods in RPI is regularly reviewed and has had many changes in the past without uproar.
- Trustees are generally powerless to keep benefits at RPI in private sector DB if legislation is referred to as other docs state rules are overriding unless employer consent given.
- My experience of DB schemes is that it applies automatically fir 90% of schemes for deferred pension increases but on 10-20% of schemes fir pensioners. So it doesn't impact on the members it is supposedly a better measure for!
- Overall I don't believe the change to CPI with some housing costs is unreasonable but that the process of implementing it has been done too fast without quite enough thought.

Mark

+ 1. Majority of our DB schemes are affected for revaluation but not indexation.

Doesn't this describe most legislation, regardless of flavour/colour of party in power ?

Ripoff_2

markr007 wrote: »

A few things from reading some of these posts:

- The formula affect is more like 0.5% rather than 1% difference.
- The remaining difference is mostly housing costs.
- The geometric mean effectively assumes that when prices rise people buy more of cheaper brands than before which seems inherently sensible.
- CPI will likely include some housing costs in the future reducing the gap.
- The basket of goods in RPI is regularly reviewed and has had many changes in the past without uproar.
- Trustees are generally powerless to keep benefits at RPI in private sector DB if legislation is referred to as other docs state rules are overriding unless employer consent given.
- My experience of DB schemes is that it applies automatically fir 90% of schemes for deferred pension increases but on 10-20% of schemes fir pensioners. So it doesn't impact on the members it is supposedly a better measure for!
- Overall I don't believe the change to CPI with some housing costs is unreasonable but that the process of implementing it has been done too fast without quite enough thought.

Mark

Just a couple of points I would like to make, if I may.

1) The variance is between 0.4% and 0.86% but the Government has said it will be about 1%, the ONS has also said it will be 1.18% for the next 5 years. If you would like to see the effect of this variance then please download the Effects Calculator at http://home.btconnect.com/AP_Publications/effectscalc/

2) Pensioners are not always able to buy the cheapest brands because they are not able to get about like younger people, many have to use more expensive local shops and many do not have transport, many have to use third parties to shop for them. Especially as they get older where this change really does impact because over time the loss is far greater. (see Calculator)

Therefore they can not always visit the cheaper out of town hypermarkets or cheaper shops as easily as younger people, they often have to pay people to assit them and they can not do the things they once could because of their age and thus have no choice but to use expensive services and trades. So I don't think there is a valid argument for using Geometric mean. Pensioner inflation as we age, actually increases because of these reasons and many more besides.

3) The basket of goods in both measures are regularily reviewed and that is quite right to do over time as items change. But this argument is about changing the measure of indexing of pensions to an index that was not designed as a domestic inflation measure and therefore should not be used in it's present form, see post 313 for further details why.

4) Your final statement "the process of implementing it has been done too fast without quite enough thought". Is exactly why this EDM has been proposed, this whole issue requires an impact analysis and deeper thought and consideration than this Government has given. It is being rushed in without understanding the full impact and as these posts have shown there are plenty of problems with this approach, the Government needs to SLOW DOWN, STEP BACK and THINK before making changes of this magnitude.

cvd

Point 2 that Ripoff has made is a very good one and is what I was alluding to when I said "It all depends.." in my previous post. As you move up the income scale, then CPI becomes a more sensible measure of inflation because most spending is discretionary and substitution is usually possible.
But as you move down the income scale, RPI is more sensible. A much greater proportion of poor people's incomes is spent on essentials such as gas, electricity, water, council tax, etc, where no substitution is possible. In addition they may already be buying the cheapest loaf of bread.

Everyone buys different things and so we all have different inflation rates.

Prof_as_was

cvd wrote: »

Everyone buys different things and so we all have different inflation rates.

Right - and differing investment in OPs, that is to say, different amounts invested and different amounts of deferred wages due. For me, the discussion about "appropriate" inflation indexing for different classes, or even for individuals, according to need or as experienced, is interesting, (surely leftish?) stuff, but beside the point and the wrong issue for threatened OP holders. Its not a bloody benefit, not a handout to the poor old needy! Its a contracted investment deal, and I've met the terms of payment for 40 years.

For me, the issue we must stick to the despotic and arbitrary expropriation of established rights, contracts and understandings - exercised on a singled out, thought-to-be-soft target. Webb backed down fast enough on the the private OPS, perhaps when he feared the court-room. After his smug evasions and repetitive bleats today on the Guardian site, I am convinced that's where to put our brains and energy.

See the Civil Service Pensioners Alliance home page http://www.cspa.co.uk/ for an excellent statement about the legal position as they have it.

Ripoff_2

Just been on the Guardian live web site with questions to the Minister Steve Webb, many questions on RPI to CPI but would not answer any of them. Did answer one I asked about retirement age at 66. I said that they have moved the goal posts by 6 years, he said they hadn't but answered a group question on the subject with the following "After that we are reaching equality between men and women at 65 in late 2018 (rather than 2020 as planned) and we are reaching age 66 for men and women in 2020 (rather than by 2026 as planned)." his own words.

If it was planned as 2026 to reach 66 by the previous Government and now it is 2020, my maths say that is 6 years moved forward. It worry's me when the Minister can't count perhaps that's why he believes moving to CPI is a good thing, or perhaps he just made a mistake, I'll give him the benefit of the doubt.

Ripoff_2

96 MP's have signed the EDM so far, great news, still rising, keep up the fight!!!! Get those Emails and Letters in to your MP's and Steve Webb the pensions Minister.

LAB = 78 LD = 4 CON = 0 OTH = 14

Interested_Taxpayer

Ripoff wrote: »

Just been on the Guardian live web site with questions to the Minister Steve Webb, many questions on RPI to CPI but would not answer any of them.

Damn. I missed it because I was late back from a funeral. Well done to everyone who piled in. What a disgraceful performance from Webb. Anyone reading his eventual reply then running off will see that.
I will now fire a letter off to the Guardian to see if they will pick up on our unanswered points. I will also write to Rachael Reeves giving her detail of the live web non-event. She may be able to 'throw' something at Webb across the floor of the House.