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Retail Price Index (Miscalculation)

Volume 124: debated on Monday 14 December 1987

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3.32 pm

(by private notice): To ask the Secretary of State for Employment if he will make a statement on the recently announced miscalculation in the compilation of the retail price index as a result of computer error.

I regret that, in 1985, a mistake was made in one of the programmes for computerising the monthly compilation of the retail prices index. As a result, both the level of the index and the year-on-year inflation rate have in most months from February 1986 to October 1987 been understated, on average by about one tenth of 1 per cent.

My hon. Friend the Minister for Social Security and the Disabled hopes to make a statement to the House later this week on the action to be taken in line with the principle that the Exchequer should not benefit from the effects on social security expenditure.

The computer programme error has now been put right, and I believe our calculation system to be wholly correct. I am however, asking the head of Government statistical service to review it.

Is the right hon. Gentleman aware that this new system of calculation is the direct result of the cost-cutting Rayner review of the Government's statistical service in 1982–83, which was designed to cut the number of statisticians by one third from 1,430 in May 1979 to 960 in April 1984? What is the point of installing computers if the number or calibre of statisticians employed to use them is cut so much that fundamental errors such as this are made? Does this not show that the Government's cost cutting, so far from improving efficiency, is often a false economy?

Why, when the right hon. Gentleman's officials round the figures, do they alway seem to round them down rather than up, knowing that millions of pensioners and others on benefit will be deprived of the full increase in line with the cost of living, which is their legal right?

The Secretary of State has said that pensioners and the severely disabled will be compensated. I should like to know whether full compensation will be paid to them in a lump sum bonus before Christmas. Why will this compensation not extend to all other persons in receipt of other benefits that the Government are under a statutory obligation fully to uprate in line with inflation —especially widows, the unemployed, the sick, the war and industrial disabled and those receiving maternity allowance, attendance allowance, invalid care allowance and mobility allowance, including their dependants?

As tax allowances and index-linked savings have also been under-calculated, are not the Government obliged under the statutory indexation provisions and the Rooker-Wise amendment to recompense others who have lost out, such as those with national savings and occupational pensioners? Will they all be contacted and repaid?

Finally, the Secretary of State has said that supplementary pensioners whose benefit is not statutorily index-linked will be compensated. We welcome that statement, and believe that that principle is right. If pensioners on supplementary benefit are compensated, however, why should not others on supplementary benefit, whose need is just as great, be compensated as well? As there are no lengths to which the Government will not go to claw back money from those whom they allege have been overpaid, surely they must now be even-handed in repaying all whom they have short-changed?

The hon. Gentleman has it entirely wrong; and not untypically. First, the miscalculation has nothing to do with staff cuts. His assertion that it has is entirely wrong. It is the result of a simple human error, which we regret, but it does not stem from staff cuts. There was a computer programme error. If I may put it this way, there was a computer programme designed for Socialist inflation. In other words, the programme missed out everything after the decimal point. That might have been all right when inflation was running at 20 per cent.—it might not have mattered then—but now that it is down to 4 per cent. it is obvious that such a fault will have an effect.

It seems that the hon. Gentleman insists on refighting all the social security battles of four years ago. He should remember that the greatest clawback fidddle was perpetrated by the last Labour Government, who changed the basis of the uprating from historic to forecast. Pensioners lost £1 billion, and they never got it back.

I repeat that the Exchequer will not gain from the social security underpayment. My hon. Friend the Minister for Social Security and the Disabled, who is seated on the Treasury Bench, will be making a statement on this issue later in the week. The average retirement pensioner has lost so far about £2, which is about 5p per week. For the financial year 1987–88, he will lose £2·60. For the financial year 1988–89, he will lose £5·20 if we do nothing about the miscalculation. However, we do intend to do something about it, and we shall be making special extra payments to national insurance retirement pensioners, supplementary pensioners and the severely disabled. I must ask the hon. Gentleman to await the statement of my hon. Friend the Minister of State on the way in which the special extra payments are to be made.

Is my right hon. Friend aware that most people will welcome the prompt way in which the Government have announced that the miscalculation will be rectified? It is right that pensioners should be recompensed for any marginal error that has been made, but does he agree that the position is rather different from that of many social security beneficiaries who move in and out of entitlement? Does he agree also that it would be wrong if the miscalculation were to be used as an opportunity further to extend the payments for which Parliament has provided? Does he not think that it is rich to hear what we have from the Opposition, because, if anyone short-changed recipients of social security benefit and pensioners, it was they during periods of high inflation?

My hon. Friend is absolutely right: no one stole more from pensioners than the Labour Government, and the hon. Member for Oldham, West (Mr. Meacher) knows it. We are seeking to put the mistake right as soon as possible. The point that my hon. Friend makes about people moving in and out of benefit is right. People will believe it is entirely sensible that we should seek to recompense pensioners.

It appears that the error took place some two and a half years ago, in 1985. What changes has the Secretary of State made to arrangements for checking computer programmes in future so that they do not go so long again without checking? He said that the Treasury will not benefit from the error. Is the import of what he said in response to the hon. Member for Oldham, West (Mr. Meacher) that some citizens will still lose because of the error?

I shall have to ask the hon. Gentleman to wait for the social security statement. I have made it clear that we will seek to make special payments to the pledged beneficiaries; those include the people to whom I have referred. The error itself came to light as part of one of our regular checks. I believe that the system is correct now, but, as I said, a review is being made to check just that.

If, as the hon. Member for Oldham, West (Mr. Meacher) suggests, my right hon. Friend was part of a conspiracy to defraud the poor, why is it that my right hon. Friend, the moment he discovered the error, confessed it publicly and has made a statement in the House today?

I agree entirely with my hon. Friend. We are by this time used to the hon. Member for Oldham, West (M r. Meacher); he normally manages to blow any opportunity that is given to him.

Can the Secretary of State explain why this error went unnoticed for 21 months? It seems an extraordinary length of time. In anticipation of the DHSS statement, can he make a straightforward statement now that no one will lose because of the mistake? The Government are dealing with the poorest of the poor. If he cannot make that statement, it means that, because of their incompetence, the Government are about to chisel some of the poorest in the country.

I will not try to pre-empt the statement that my hon. Friend will make. What I have said is that the Exchequer will not gain from the social security underpayment. That is a firm pledge by the Government. I have also said that special extra payments will be made to national insurance retirement pensioners, supplementary pensioners and the severely disabled, but for the rest the hon. Gentleman must wait for the statement.

Does my right hon. Friend agree that the public would much rather have a 0·09 per cent. inflation error from this Government than the 26 per cent. inflation rate they had under the Labour Government? If my right hon. Friend discovers, in looking for the source of the error, that the programme was written to anticipate the return of a Labour Government and to concentrate on the big figures rather than the decimal points, will he instruct the programmers that such an eventuality is unlikely?

That I confirm. My announcement on Friday was that inflation had come down to just over 4 per cent. and could well come down further. We are comparing that with an inflation rate in the Labour Government's term of office of over 20 per cent. Nothing did more damage than that to pensioners' standards of living.

Although the Secretary of State is attempting to minimise the error, I think that the House recognises that several million pounds are involved. May I remind the Minister that when people default payment of income tax, interest is charged? I wonder, therefore, whether calculations and attempts will be made by the Minister to ensure that the money goes back to the people who are entitled to it? While I am on this point, I want to inquire about another group which has not been mentioned so far—students and student grants. Students are on miserable rates of pay. Will they be included in the calculations for improvements?

I do not think that the RPI has anything to do with students' grants. I have announced clearly, I hope, that the Exchequer will not gain from social security underpayment. I have also drawn, as is only fair, the distinction made by my hon. Friend the Member for Chichester (Mr. Nelson) between pensioners and those moving in and out of benefit. The Government do not draw back from that distinction.

Does my right hon. Friend accept that many hon. Members will think that he has come forward very quickly to admit the error? That is a good thing for a Minster to do. Does he also accept that many of us who have been told that computers are infallible have now learnt that they can make human mistakes? Does that mean that in future we do not have to accept that computers are infallible and that they are almost as bad as human beings?

What one gets out of a computer obviously depends on what one puts in. If the programme has been written incorrectly, incorrect information will obviously come from the computer. That is precisely what happened. I accept what my hon. Friend has said.

Order. This is a private notice question. I remind the House that there will be a further opportunity to question Ministers later in the week. I have noted carefully those hon. Members who have been rising and who have not been called.