The UK government has recently changed the basis on which it calculates increases to benefits and pensions. It used to base them on the RPI, the Retail Price Index. Now it bases them on the CPI, the Consumer Price Index. What is the difference, and what does the change mean?
It is a complex subject, and even experienced economists have asked the Royal Statistical Society for a definitive account of the changes and what they imply, and whether or not they are justified. Here we provide that definitive account.
It is not for beginners. For those who want a basic introduction, see the accounts by Andrew McCulloch that we published here and here back in May. Nor is it short. It is several times the length of our usual website pieces. Nevertheless we post it here; we believe that financial professionals, economists, analysts and others may find it useful, now and to refer to in the future. It is written by Jill Leyland, who is the Chair of the RSS National Statistics Working Party.