MPs on the Treasury Select Committee have recommended that interest on student loan repayments should switch from following the Retail Prices Index (RPI) to the Consumer Prices Index (CPI).
In written evidence to the Committee, the Royal Statistical Society said: ‘Instead of one or the other of the RPI or the CPI being used consistently by the government for indexation, these indices seem to be used very selectively indeed. It is grossly unfair that, presently, Government formulae which affect people’s incomes (in the form of pension and benefit increases) often use the CPI, which normally provides a lower estimate of inflation, while several of their outgoings including student loan repayments […] are still related to increases in the RPI, which normally gives a higher estimate.’
This comment was published in the Select Committee’s final report in support of its recommendation to switch to CPI. In the Committee’s words, ‘RPI was de-designated as a National Statistic, and it has been roundly criticised as a flawed measure of inflation,’ before concluding: ‘The Government should abandon the use of RPI to calculate student loan interest rates in favour of CPI.’
While the RSS is pleased that the Committee has acknowledged the current discrepancy in Ministers’ use of RPI and CPI, we would like to see a longer term plan towards widespread use of the Household Cost Indices (HCI).
HCI is currently being developed by ONS and the RSS is co-hosting an event this week on how the new price index will work. The meeting is open to all but please register first if you’d like to attend.