MNI INTERVIEW: UK Stats Authority Heads Regret Slow RPI Reform

--UK Treasury Announces No RPI Reform Before 2025

--UK Statistics Authority Chair Norgrove On Glacial RPI Reform 

By David Robinson

     LONDON (MNI) - The two most senior officials in UK statistics told MNI they

were disappointed by a government decision to delay reform of the Retail Prices

Index, which will mean that bond holders continue to receive higher returns for

more than five years, although they welcomed a commitment to ditch rather than

overhaul its flawed methodology.

     "From a technical point of view ... the changes could be made in early

2021," UK Statistics Authority Chair Sir David Norgrove said in an interview

after Chancellor of the Exchequer Sajid Javid announced Wednesday he would not

consent to proposed changes to RPI, which is the reference used for the UK's

inflation-linked government bond market, before February 2025.

     UKSA had recommended fixing RPI, which consistently runs about 1 percentage

point above the consumer price index, by aligning its methodology with the

Consumer Prices Index including owner occupiers' housing costs (CPIH). Norgrove

said he was glad Javid did not back partial reform of RPI, which had been

floated as a possibility by the House of Lords Economic Affairs Committee, and

which would have narrowed the difference with CPI.

     "It would be wrong to fix one bit of RPI but not the other problems," he

said.

     The lack of immediate action means index-linked gilt holders will continue

to receive higher returns through to 2025.

     "We will continue to produce RPI as we have been doing, which is broadly

unchanged," acting National Statistician Jonathan Athow told MNI.

     Javid acknowledged UKSA's view that continuing to produce an unreformed RPI

could undermine the credibility of UK statistics but in an open letter to

Norgrove he said that as it was widely used across the economy time would be

needed for change.

     The Chancellor's consent is not required from 2030 onwards, and at that

stage UKSA would be free to make its own changes. The government has said that

in the longer term it wants to move to CPIH.

     UKSA, however, maintains the view that there will never be a single

inflation measure for all purposes. Other indices, including a democratic price

measure in which the spending patterns of lower-spending households have

equivalent weight to those of wealthier households, are being worked on.

--MNI London Bureau; tel: +44 203-586-2223; email: david.robinson@marketnews.com

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