Written question asked by Rachel Reeves (Labour) on Thursday, 16 December 2010, in the House of Commons. It was due for an answer on Tuesday, 21 December 2010. It was answered by Steve Webb (Liberal Democrat) on Tuesday, 21 December 2010 on behalf of the Department for Work and Pensions.

Inflation: Consumer Price Index

Question: To ask the Secretary of State for Work and Pensions (1) what discussions he has had with the Royal Statistical Society on the use of the consumer price index as a measure for inflation compensation; and if he will make a statement;

Answer: The Government believes that CPI is the appropriate index for measuring changes in the cost of living. It may be helpful if I set out some of the consideration that were factors in our reasoning:"1. The CPI is the headline measure of inflation in Great Britain, forming the target for the Bank of England's Monetary Policy Committee;""2. The CPI excludes mortgage interest payments, which are not relevant to the majority of pensioners and benefit recipients;""3. The methodology used the calculate the CPI takes into account the fact that many people tend to trade down to cheaper goods when prices rise which the RPI does not;""4. In terms of population coverage the Retail Price Index (RPI) excludes a significant group of pensioners (pensioner households who receive 75% or more of their income from the State). The CPI includes those pensioners."The decision to switch to the CPI for price measurement for benefit and pension uprating, and provide the statutory minimum for occupational pension indexation, was taken by DWP Ministers with advice following discussions between DWP, HMT and other Departments, using appropriate evidence including that made available by the Office for National Statistics, over which the UK Statistics Authority has oversight. No discussions have taken place between the Department and the Royal Statistical Society on this matter.

Secondary information