CPI ‘is costing Britain billions’

Britain’s government should stop using a discredited measure of inflation for selling index-linked bonds which is costing taxpayers billions a year, an official review said yesterday.

The review, carried out by Paul Johnson, head of the Institute for Fiscal Studies think tank, also urged Britain to replace the Consumer Price Index as its main inflation measure with another index, the CPIH, which includes more housing costs.

Mr Johnson said Britain had an “unhelpful proliferation” of inflation measures. He recommended ending the use of the Retail Price Index as a basis for a range of contracts, including inflation-linked government bonds, which could instead be pegged to the CPI or CPIH.