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Retail Prices Index (Error)

Volume 124: debated on Friday 18 December 1987

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To ask the Chancellor of the Exchequer what will be the effects of the retail prices index error on occupational and public service pensioners; and if he will make a statement.

To ask the Chancellor of the Exchequer what action he will take to compensate public service pensioners who have suffered any loss as a result of the miscalculation of the retail prices index.

To ask the Chancellor of the Exchequer what adjustments will be made to Civil Service pensions arising from the computer error on the retail prices index; and if he will make a statement.

Some private sector occupational schemes provide benefit increases which to a greater or lesser degree reflect changes in the cost of living. Others do not. In the small minority of private schemes where benefit increases are linked to the retail prices index it will be for those responsible to decide how, if at all, they should react to the small error in the index. For public service official pensioners, the Government will, after the recess be laying an order which will reflect in the normal way the order made in November uprating social security benefits from 11 April next. As for the statutory social security uprating, the rate of increase in these official pensions will be 4.2 per cent. These pensioners will suffer no permanent loss in their pension rates, as their pension levels from 1 April 1989 will be what they would have been if the error in the index had not occurred.The rates of pension received by retired public servants vary very widely according to their length of service and final salary when in employment. Flat-rate compensation for the index error would be inappropriate. Precise compensation would have administrative costs out of proportion to the sums concerned. Many public service pensioners are also national insurance retirement pensioners and will receive compensation on that account. The Government will not, therefore, be making any ex gratia payments to members of public service schemes that they administer, including the parliamentary scheme and the schemes for the judiciary, the Civil Service, the National Health Service, the armed forces and teachers. For other public service schemes, including those for local government, the police and the fire service, the issue will be considered by the relevant Government Departments, in consultation with the public authorities concerned.In informing the House of the error in the index on 11 December, my right hon. Friend the Secretary of State for Employment made clear that the Exchequer should not benefit from its effects on social security expenditure. On the same basis, we do not intend that the Exchequer should benefit from the effects of the error on the public service pensions the Government administer—a sum of £5 million or more. Like the comparable sum arising on social security, this will be available for allocation to suitable charities, including those active in support of retired or needy members of the public services. Details of the arrangements will be announced later.

To ask the Chancellor of the Exchequer what action he will take to correct the entitlements of those who hold, and those who have disposed of, national savings and gilt-edged index-linked securities, owing to the miscalculation of the retail prices index.

The prospectuses for index-linked gilts and national savings instruments state that the relevant index for calculating interest and redemption values is the general index of retail prices maintained and issued monthly by the Department of Employment and published in the London, Edinburgh and Belfast Gazettes. In the case of an index-linked gilt the index figure applicable to any month is the figure issued seven months prior to the relevant month and relating to the month before that prior month. In the case of index linked national savings, the relevant figure is the index issued in the immediately preceding calendar month.The amounts paid to the holders of index-linked gilts and national savings instruments have been calculated strictly in accordance with this formulation. The question of retrospective adjustment does not therefore arise.