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CPI/RPI Pensions Uprating

The hon. Gentleman is right. Jim did base his future plans with his wife on what he was told was a guarantee—a written guarantee—in the guide itself. That is not just unfortunate, but disgraceful. I agree that others should not be misled in that way in the future, and it should not have happened in the past. Thousands of pounds have been cut from Jim's own pension. After 35 years of public service, the Government have knowingly cut his pension to pay off a deficit he did not create. There are so many other Jim Singers. I recently met firefighters who were particularly angry that a firefighter retiring on a full pension will lose £52,000 over 20 years. This comes on top of a three-year pay freeze, after two years of only a 1% increase, which means no real increase in pension or pay for the best part of five years. The real cut in spending power for firefighters is a pre-retirement cut of 20% and a post-retirement cut of 22%. A 40% cut in income is a terrible price to pay for a crisis these people did not create. I have met so many others, too. A Forestry Commission worker who worked for 24 years is losing £17,000; a jobcentre worker who worked at the Department for Work and Pensions for 26 years is losing £20,000; a tax inspector at Her Majesty's Revenue and Customs with 36 years' employment is losing £45,000. I became angry myself when I encountered examples provided by the Forces Pension Society of some horrendous losses—I do not know whether other Members have seen them. A disabled double amputee, a 28-year-old corporal, will lose £587,000 by the age of 70; a 40-year-old sergeant in the Royal Marines will lose £212,000 by the time he is 85; members of the Royal Fleet Auxiliary will lose literally tens of thousands of pounds. This is simply unacceptable. Why, then, the change from RPI to CPI? In past discussions of this question, the Minister has been robust in his view that whether or not there was a need for cuts to deal with the deficit, CPI is a ““better measure of inflation””. Numerous others have contested the suitability of CPI as an appropriate measure for pensions. The Royal Statistical Society is a particular example, and it provided us with another briefing yesterday. Its vice-president, Jill Leyland stated forcefully in a letter to the chair of the UK Statistics Authority:"““We do not feel that CPI currently serves the purpose of being a sufficiently good measure of price inflation as experienced by households to be used in uprating pensions””." She went on to warn that its use would"““cause damage to consumer confidence in official statistics if it is perceived that uprating to pensions and other benefits is being governed by an index perceived by many as inappropriate and unfair.””" It was reiterated in the briefing sent to all Members yesterday that it is important for any index to enjoy the confidence of pensioners—and this index does not. CPI was invented as a tool of macro-economic policy so that inflation rates could be compared across Europe, but because there was no agreement on how to calculate housing costs across European countries, that element was left out. CPI, because of its exclusion of housing costs such as mortgages, council tax, vehicle excise duty and TV licences, is criticised for not properly representing the real costs that pensioners face. On top of that, as Members will know from the previous debate, there is what is described as the formula effect. CPI uses a geometric mean rather than an arithmetic mean, and we have long debates about those different means, so we have all become statisticians on this issue. In its calculations, CPI is supposed to take into account the ability of a person to shop around for cheaper goods. This—falsely in the eyes of many statisticians—assumes a sophisticated knowledge by pensioners of price variations and that consumers are sufficiently mobile to shop around. In reality, many pensioners are not the perfect shoppers of the economic model that CPI puts forward and are not mobile enough or capable of shopping around to secure the lowest price of all the goods in this basket.