Tories issue pension inflation warning
The Conservatives have warned that adopting the European measure of inflation could halve state pension increases.
In the April budget the chancellor said that there was a ‘case in principle’ for adopting the internationally-recognised harmonised index of consumer prices (HICP) instead of the retail price index (RPI) – the current measure of inflation in the UK.
However Oliver Heald, the shadow minister for Work and Pensions will use a Commons Debate on pensions today to argue that adopting the European measure could leave 11 million pensioners in the cold.
‘It is hard to see why Gordon Brown wants to change the inflation measure unless it is to pave the way for the Euro. The international measure is generally lower than the current UK (RPI) measure, so any change will cut future benefits increases, possibly by up to half,’ he explained.
One of the main differences between the two measures is that the international measure excludes Council Tax, which has increased by 60% since 1997, compared with general inflation of only 12%.
Gordon Brown has said that he will ‘continue to examine’ the detailed implications of a change.
