ONS decides to continue with inaccurate RPI calculation

Statistics agency chooses consistency over accuracy.

Against expectations and the recommendations of a number of influential economists, as well as its own consumer prices advisory committee, the ONS has decided not to change how the RPI – one of the two key indices measuring the rate of price inflation – is calculated.

The pressure to examine the index comes from the longstanding difference between the RPI and CPI measures of inflation. Except for the brief period in the midst of the recession, when both indices were recording deflation, RPI has consistently shown levels of inflation higher than CPI. Here's the chart for the last three years, for instance:

 

Some of that difference is due to the fact that the two indices measure subtly different things – RPI includes a broader measure of housing costs, for instance, and it ignores very high and low income households. But the ONS has known for a while that there is also a discrepancy caused by the different formulae used to calculate them.

The ONS began a consultation into whether and how it should eliminate this "formula effect", and has concluded that:

Use of the arithmetic formulation (known as the ‘Carli’ index formula) in the RPI is the primary source of the formula effect difference between the RPI and the CPI… This formulation does not meet current international standards.

So what's it going to do about it? Well, nothing:

The National Statistician also noted that there is significant value to users in maintaining the continuity of the existing RPI’s long time series without major change, so that it may continue to be used for long-term indexation and for index-linked gilts and bonds in accordance with user expectations.

Therefore, while the arithmetic formulation would not be chosen were ONS constructing a new price index, the National Statistician recommended that the formulae used at the elementary aggregate level in the RPI should remain unchanged.

The ONS will, however, develop a new measure of inflation, called RPIJ, which will use a different, better, mathematical formula.

The consumer prices advisory committee, a body which meets around five times a year to advise the ONS on measures of inflation, accepted that the ONS has a responsibility to make sure that there is a level of continuity in the RPI calculations which would be destroyed if there were a change to the formula. But, given the ONS also has a responsibility to compile those statistics "in line with best practice", CPAC concluded that not changing RPI would be "unsuitable".

On the other side, arguing for no change, were 332 of the 406 replies to the public consultation. The ONS said:

The large majority of responses did not address methodological issues but identified the impact that the changes implied… would have for them.

The competing requirements present a tricky path for the ONS to follow, but it does feel like it has picked the wrong option at this point. The job of the statistics agency is surely to produce accurate statistics, rather than statistics which are continually inaccurate in known ways. The fact that RPI is used to decide the value of, amongst other things, index-linked bonds is a reason for it to be correct, not for it to be artificially inflated.

As it stands, the ONS has decided to continue publishing a "measure" of inflation which has an accepted and understood upward bias of 1 per cent a year. It has done this, not because of any real statistical reasoning, but because greater accuracy would be bad for a majority of stakeholders. That seems like a bizarre abdication of its duty.

Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Ansbach puts Europe's bravest politician under pressure

Angela Merkel must respond to a series of tragedies and criticisms of her refugee policy. 

Angela Merkel, the Chancellor of Germany, is supposed to be on holiday. Two separate attacks have put an end to that. The first, a mass shooting in Munich, was at first widely believed to be a terrorist attack, but later turned out to be the actions of a loner obsessed with US high school shootings. The second, where a man blew himself up in the town of Ansbach, caused less physical damage - three were seriously injured, but none killed. Nevertheless, this event may prove to affect even more people's lives. Because that man had come to Germany claiming to be a Syrian refugee. 

The attack came hours after a Syrian refugee murdered a pregnant Polish woman, a co-woker in a snack bar, in Reutlingen. All eyes will now be on Merkel who, more than any other European politician, is held responsible for Syrian refugees in Europe.

In 2015, when other European states were erecting barriers to keep out the million migrants and refugees marching north, Merkel kept Germany's borders open. The country has resettled 41,899 Syrians since 2013, according to the UNHCR, of which 20,067 came on humanitarian grounds and 21,832 through private sponsorship. That is twice as much as the UK has pledged to resettle by 2020. The actual number of Syrians in Germany is far higher - 90 per cent of the 102,400 Syrians applying for EU asylum in the first quarter of 2016 were registered there. 

Merkel is the bravest of Europe's politicians. Contrary to some assertions on the right, she did not invent the refugee crisis. Five years of brutal war in Syria did that. Merkel was simply the first of the continent's most prominent leaders to stop ignoring it. If Germany had not absorbed so many refugees, they would still be in central Europe and the Balkans, and we would be seeing even more pictures of starved children in informal camps than we do today. 

Equally, the problems facing Merkel now are not hers alone. These are the problems facing all of Europe's major states, whether or not they recognise them. 

Take the failed Syrian asylum seeker of Ansbach (his application was rejected but he could not be deported back to a warzone). In Germany, his application could at least be considered, and rejected. Europe as a whole has not invested in the processing centres required to determine who is a Syrian civilian, who might be a Syrian combatant and who is simply taking advantage of the black market in Syrian passports to masquerade as a refugee. 

Secondly, there is the subject of trauma. The Munich shooter appears to have had no links to Islamic State or Syria, but his act underlines the fact you do not need a grand political narrative to inflict hurt on others. Syrians who have experienced unspeakable violence either in their homeland or en route to Europe are left psychologically damaged. That is not to suggest they will turn to violence. But it is still safer to offer such people therapy than leave them to drift around Europe, unmonitored and unsupported, as other countries seem willing to do. 

Third, there is the question of lawlessness. Syrians have been blamed for everything from the Cologne attacks in January to creeping Islamist radicalisation. But apart from the fact that these reports can turn out to be overblown (two of the 58 men arrested over Cologne were Syrians), it is unclear what the alternative would be. Policies that force Syrians underground have already greatly empowered Europe's network of human traffickers and thugs.

So far, Merkel seems to be standing her ground. Her home affairs spokesman, Stephan Mayer, told the BBC that Germany had room to improve on its asylum policy, but stressed each attack was different. 

He said: "Horrible things take place in Syria. And it is the biggest humanitarian catastrophe, so it is completely wrong to blame Angela Merkel, or her refugee policies, for these incidents." Many will do, all the same.