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Chancellor to consult on date of RPI reform

Reasons to choose Wilson Browne

On 4 September 2019, the Chancellor of the Exchequer, Sajid Javid, responded to the UK Statistics Authority (UKSA) request for consent to its proposals to reform of the Retail Prices Index (RPI).

The UKSA’s request followed a Lord Selects Committee report highlighting the existing flaws and concerns with use of the RPI. Until 2030, when the last relevant index-linked gilts mature, the UKSA is required by legislation to obtain the Chancellor’s consent to any change to the RPI that is fundamental and materially detrimental to the holders of those index-linked gilts.

Given the potential disruption for the RPI and the government’s current focus on Brexit, the Chancellor rejected the UKSA’s proposal to bring forward legislation to abolish the RPI altogether. However, he acknowledged that there were flaws in the RPI. On that basis, the Chancellor accepted in principle the proposal to align the RPI with the Consumer Prices Index including housing costs (CPIH), on the condition that it could not happen before February 2025. Although this proposal would be a more efficient approach than asking users to stop using the RPI altogether (which would require existing contracts to be rewritten), it would still have significant effects for RPI users.

To ensure better understanding of these perceived effects, the Chancellor has stated that the government will consult publicly on whether the proposed change in RPI should be made before 2030, and if so when between 2025 and 2030. The consultation is expected to begin in January 2020, and the intention is for the government and the UKSA to publish a response before the 2020 Spring Statement, and the end of the financial year.

Source

Tom Warrender

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Tom Warrender

Partner

Tom is a Solicitor and Partner with 14 years + experience advising clients in relation to commercial property matters. A Legal 500 recognised lawyer, Tom is a member of SHLA and CRELA, sits on our Board of Management & Heads our Social Housing Team, whilst…