Monday, 19 September 2011
I'm sure you're all gathering up any free cash you may have and investing it in the National Grid inflation linked bonds. If you have at least £2,000 and are happy to tie that up for 10 years then the National Grid are happy to pay you at the end of that period the £2,000 plus Retail Price Index (RPI) increases over the 10 years, as well as 1.5% on your money every 6 months ..
At the moment that looks a good deal with RPI over 5%. How can they do it? You won't find such a generous offer at your local building society or bank.
The price you and I pay the National Grid, through our electricity bills, is based on "RPI plus". The National Grid is guaranteed, by this formula, not to be squeezed by inflation. And they're not the only ones. The rail companies can, in many cases, increase fares by "RPI plus". No doubt there are other fees or charges which benefit from this automatic up rating.
In the past, as a pensioner or on benefits, you would have had your pensions or benefits uprated by RPI. But no more, these are now increased by the Consumer Prices Index (CPI). You may have noticed that the CPI year on year increases are less that those recorded by the RPI. For example, pensions and benefits were up rated in April by 3.1% (CPI) whereas the RPI was 4.7%. A pretty significant difference.
The change from RPI to CPI at a stroke saves the Gov't billions. It also has a wonderful effect on many pension schemes since future benefits will cost less.
If you're on a basic state pension or benefits you are squeezed since the increase in the cost of things you buy is more accurately measured by the RPI. The CPI significantly under represents those items that are more important to the poor.
Luckily there are people out there who are on top of this injustice.
After months of lobbying (for that read careful, well argued representation) the Royal Statistical Society (RSS), the professional body representing statisticians, has got the Gov't Office of National Statistics to review the use of CPI as the measure for uprating pensions and benefits.
In stark terms, huge, powerful, wealthy, highly profitable industries are protected from the ravages of inflation yet a 80 year old pensioner, or a family on benefit aren't. What the fuck's going on!