ONS admits RPI flawed but Government to retain it until 2020, costing businesses £781m EXTRA in rates

Thursday, August 3, 2017

A measure of inflation that affects how much business rates rise each year is flawed and should be not be used.

ONS Director General Jonathan Athow said:

"RPI is a flawed measure of inflation with serious shortcomings and we do not recommend its use.”

But businesses are set to be lumbered with the discredited measure until 2020 for the uprating by inflation of business rates when the switch to CPI will finally take place. 

The Treasury recently moved to quell speculation saying "we are committed to switching business rates indexation from RPI to CPI from 2020 and will introduce legislation in due course."

RPI was stripped of its own national statistic status in 2013 by the UK Statistics Authority.

Businesses still face £2.13billion of inflationary increases in rates through RPI over the next 2 financial years until the 2020 switch.

When our Chief Executive, Mark Rigby, met with the Secretary of State, Sajid Javid, ahead of the Spring Budget, he urged him to accelerate the switch from RPI to CPI and to implement that change from April this year.

It is untenable to use a flawed measure any longer given the intervention by the ONS.

Over the next 2 financial years until that switch, without intervention in the Autumn Budget, we believe that RPI inflation could add an extra £781million more to the gross business rates yield compared with the lower CPI measure.