Is that RPI or CPI?

November 3, 2016

In defence of its offer of a 1.1 per cent inflationary pay increase, our employer rejects the retail price index as a statistically unsound measure of inflation and presses for benchmarks against other measures of inflation that have shown more modest increases. But in its defence of an increase in tuition fees from £9,000 to £9,250, our employer claims that this is justified on grounds that it “is limited strictly to an inflationary rise of 2.8 per cent in 2017-18”, thereby “maintaining the income that universities receive in real terms”. Astonishingly, however, here our employer endorses an RPI-based measure of inflation, even though this measure (RPIX=RPI minus mortgage costs) employs the very methodology that it rejects as statistically unsound in pay negotiations.

If an RPI-based hike in tuition fees is needed to maintain income in real terms, then so is an RPI-based increase in pay. The figure of 2.8 per cent was based on an Office for Budgetary Responsibility forecast for RPIX in 2017-18. RPI and RPIX are running at 2.0 per cent and 2.2 per cent, respectively, whereas the consumer price index and CPIH (=CPI plus housing costs) are running at 1.0 per cent and 1.2 per cent, respectively. Our employer is therefore offering us a rise in pay along the lines of CPI. If it is unwilling to increase this offer to RPI, on the grounds that RPI is a flawed measure of inflation, it will be a hypocrite if it does not decrease the 2017-18 increase in tuition fees to the OBR’s forecast of a 1.7 per cent rise in CPI for that period.

Our employer can’t have it both ways: not RPI for me and CPI for thee.

Michael Otsuka
Professor of philosophy
London School of Economics

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