A decision is expected in the High Court this morning on the legality of the government’s decision to switch from RPI to CPI to calculate annual public sector pension upgrades.
A group of trade unions have accused the government of unlawfully attempting to reduce pension costs in the battle to cut the UK’s financial deficit.
The challenge stems from a decision to use the consumer price index (CPI), instead of the normally faster-rising retail price index (RPI), to measure price increases influencing the uprating of public sector pension schemes.
Government lawyers say ministers believe CPI to be “a more appropriate measure of changes in the general level of prices”. They argue the change is legal and will save Â£6bn a year and help to return the UK to a secure financial footing.
This week, the Office for Budget Responsibility revised its estimate of the annual differential between RPI and CPI, suggesting it could be as low as 1.3% a year.
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