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By David Robinson
     LONDON (MNI) - John Pullinger, the UK National Statistician, is firmly of
the view that RPI, a retail price index used as the reference point for
index-linked gilts, is badly flawed and he wants a "choreographed" move away
from it rather than making piecemeal changes to it.
     Pullinger gave evidence to the House of Lords Economic Affairs Committee on
Tuesday and the following are the key policy points he made:
     -Pullinger argued against correcting any single flaw in the RPI, with
National Statistics no longer seeking to improve the measure.
     "If I were to make a change I would want to change all the things that need
to be changed," he said.
     Among the many shortcoming in RPI cited by Pullinger were its coverage and
the way it reflects housing costs. He said all of these needed altering and that
if he sanctioned all of these changes it could turn RPI into the alternative
consumer price measure, CPI.
     -RPI is still being used as the reference point for inflation linked gilts
issued by The Debt Management Office (DMO). Pullinger, instead of taking the
'pure' line of arguing for a swift move away from RPI, instead backed a
"choreographed" approach to moving away from it, involving the DMO, the Treasury
and the Bank of England.
     "I would want to make .. changes so they don't have a destabilising effect
on markets," Pullinger said.
     -Pullinger's evidence raised questions over the whole process of
overhauling and improving UK statistics. He was asked whether he saw his role as
simply being to produce the best statistics rather than to worry about the
impact on financial markets and the public finances of statistical changes.
     He said that he interpreted his role "as producing statistics that serve
the public good."
     That means he takes into account the effect of changes that could create
economic harm but it is an approach that leaves him open to accusations of
blurring the lines between technical expertise and policy advice.
     -The move away from RPI does appear to have become mired in politics.
     One committee member, former top Treasury official Terence Burns, asked
Pullinger if decisions over RPI were being "taken on quite political grounds."
The Treasury is worried about lost revenue from an RPI switch, as the latter
runs higher than CPI by 0.7 basis points on average.
     Pullinger admitted that his situation was "definitely uncomfortable" adding
that "if we can find a way out of it no one would be more pleased than me."
     -The evidence session followed a recent similar session with Elizabeth
Truss, Chief Secretary to the Treasury, who said the fiscal costs of moving away
from RPI had to be considered and DMO head Robert Stheeman, who warned CPI
linked gilts could be worse priced because of weaker demand for them than RPI
     Pullinger's evidence highlighted how messy the proposed switch away from
RPI is becoming, with the head statistician trying to pick a path through the
competing concerns of improving statistics and impacting debt markets and the
public finances.
--MNI London Bureau; tel: +44 203-586-2223; email:
MNI London Bureau | +44 203-586-2223 |