Paul_Treloar_
Director of Policy and Services, Disability Alliance, London
Member since
15th Sep 2006
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RE: percentage increase of means tested benefits
Thu 17-May-07 08:45 PM |
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The uprating order will increase most national insurance benefits by the retail prices index (RPI), which is 3.6% and increase most income-related benefits by the Rossi index which is 3%. The RPI is applied to uprate contribution-based jobseeker’s allowance, child benefit, incapacity benefit, carer’s allowance and disability living allowance. The RPI is calculated by the Office for National Statistics (ONS) each month by collecting about 110,000 prices of ~650 goods and services in ~150 locations and the internet. Goods include bread, cereal, furniture and clothing, water, gas and electricity.
The ONS uses data from the DWP’s family expenditure survey and other detailed expenditure analyses from market research companies and trade reports, and arrives at a representative shopping basket. The changes in prices of the goods in the basket are used to produce a headline figure which is intended to be broadly representative of the cost of living.
With reference to the RPI, it is worth pointing out that the patterns of pensioner expenditure are not explicitly factored into the representative shopping basket. The ONS explains that that pattern of demand is probably atypical and would distort the average. Pensioner households, which on average derive about three quarters of their income from the state, are having some of their benefits uprated by the order according to an inflation index which does not explicitly acknowledge or comprehend how they spend their money. A similar situation exists for disabled people.
The other index is the Rossi index, which is used to uprate income-based jobseeker’s allowance, council tax benefit, housing benefit and income support. It is compiled in the same way as the RPI, except that it excludes rent, mortgage interest payments and housing depreciation costs.
Both those indices are different from the consumer price index (CPI), which is the measure now used by the Bank of England to calculate bank rate. The CPI is similar to the RPI in so far as it uses a basket of allegedly everyday goods to compare how prices have changed over the period, but it also excludes council tax, mortgage interest payments and other major housing costs.
All this and more in the rather impressive speech by David Ruffley, conservative shadow on welfare, in the recent uprating debate in Parliament, see Hansard for the debate
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