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Last Updated: Tuesday, 3 June, 2003, 22:59 GMT 23:59 UK
Tories issue pensions warning
Pensioner
The Tory spokesman raised the inflation issue ahead of a debate
Increases in the state pension could be halved in the future if Gordon Brown decides to change the way inflation is measured, according to the Conservatives.

During the April Budget, the chancellor said there was a "case in principle" for adopting the internationally-recognised harmonised index of consumer prices (HICP) instead of the retail price index (RPI) - the current measure of inflation in the UK.

Tory pensions spokesman Oliver Heald said the HICP - used in other EU countries - generally calculated inflation as being lower than the RPI figure.

HICP inflation since 1997 has totalled 6.4% compared to the 11.9% measured by the RPIS.

Mr Heald said adopting the HICP measure could impact on benefits such as the state pension, disability living allowance and the widowed parent's allowance - all of which are uprated in line with inflation.

Benefits cut?

Ahead of Wednesday's Commons debate on pensions, Mr Heald said: "It is hard to see why Gordon Brown wants to change the inflation measure unless it is to pave the way for the euro.

"The international measure is generally lower than the current UK RPI measure, so any change will cut future benefits increases, possibly by up to half.

"One of the key differences is that the international measure excludes council tax, which has increased by 60% since 1997, compared with general inflation of only 12%.

"The pensions crisis is bad enough already without this threat to halve future pension rises."

Mr Brown has not said he will switch to HICP but he indicated the Treasury would "continue to examine the detailed implications of such a change".




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