RPI judicial review: replacement index given green light for 2030

On 1 September 2022, the High Court published its judgment in BT Pension Trustees & Ors (the “Trustees”) v the UK Statistics Authority (“UKSA”) & Chancellor for the Exchequer in which it rejected the Trustees’ legal challenge to the UKSA’s plan to replace the Retail Prices Index (“RPI”) with the Consumer Prices Index including Housing Costs (“CPIH”) from February 2030 onwards.

The Court rejected all of the Trustees’ grounds (the details of which we summarised in an earlier post here) and, as has been widely reported, the index change will have a significant impact on index-linked gilt holders and other legacy users of RPI. However, the judgment also raises some broader points of interest in respect of the UKSA’s functions, as well as the scope of the grounds of challenge levelled against it. We identify some key takeaways and possible next steps below. 

Key findings 

First, the Court interpreted and made findings about the scope of the UKSA’s statutory power to make changes to the RPI pursuant to applicable legislation.[1]  The Court found that the RPI does not cease to exist as a result of the UKSA’s changes – it is “fundamentally changed”, which the legislation expressly permits. It found that the power to make “fundamental” changes to the calculation of RPI is very wide, and there is no basis for constraining it in the way the Trustees had contended. 

Equally, it is not for the UKSA to weigh the competing policy interests or identify winners or losers from changes to the index. The Court found that that was not Parliament’s intention when enacting the relevant legislation. Rather the UKSA is concerned with the quality of statistics and, in this context, whether RPI is an objectively suitable measure of inflation in its current form. The Court therefore declined to find any error in law in the UKSA’s position that it could only take “statistical matters” into account in deciding whether to change RPI. The Trustees had argued that this approach would mean that no one has responsibility for considering the wider effects of changes to a UKSA statistic such as RPI. However, the Court found that the use of RPI in commercial contexts is a matter for commercial actors and, in any event, it is for parliament to decide who, if anyone, should be responsible for any wider impacts of a change of this nature. What is clear is that parliament did not, when passing the applicable legislation, consider that the UKSA should bear this responsibility. As the Court said, the UKSA does not have any policy-making responsibility or capacity.

Second, the Court considered and upheld the integrity of the consultation process which the UKSA and the Chancellor conducted in 2020 in respect of the proposed change to RPI. The Court found, among other things, that, because the UKSA is not required to weigh competing interests in diverse areas of the economy, it could not have acted irrationally in excluding those matters from the scope of the consultation. 

Third, the Court looked at the contractual provisions in the new-style gilts issued from 2005 onwards, which contain a specific regime if the RPI ceases to be published – known as a ‘cessation clause’. In short, it decided (and the Trustees accepted) that a “fundamental change” to the RPI would be insufficient to trigger the cessation clause. 

Discussion and next steps 

As the Court identified, there are winners and losers of the decision to replace RPI as a measure of inflation, and the judgment will therefore be important to a range of economic actors, all the more so in light of the current economic climate. 

The Trustees have indicated publicly that they are giving further thought to the judgment, including any appeal. They would require permission from the High Court or the Court of Appeal first to bring such an appeal. Given the importance of the key issues it is possible that permission would be given.  If an appeal were to be brought, the grounds of appeal would likely focus on the interpretation of the UKSA’s statutory duty to maintain, compile and publish the RPI (and its power to make changes to it) as that is the route to a full reversal of the UKSA’s decision, rather than a re-do of the procedural steps taken to reach it. Given the decisive nature of the High Court’s judgment, an appeal would face challenges but success cannot be ruled out. Ultimately, even if the High Court judgment were reversed, the Government of the day would have the final say – it could, at any point, introduce legislation to give effect to the change if that remains the political will.

Footnotes:

[1]    The Statistics and Registration Act 2007.