The three key arguments in the High Court RPI challenge

The judgment on the judicial review was published yesterday.

As part of the review, the trustees of the BT, Ford, and M&S schemes challenged the decision to align the Retail Prices Index (RPI) with the housing cost-based version of the Consumer Prices Index from 2030 decision over RPI in three key areas:

1. The schemes argued the UK Statistics Authority's (UKSA's) RPI decision fell outside the scope of its power to amend the RPI under the Statistics and Registration Service Act 2007 and was therefore unlawful.
2. The UKSA failed to take into account the impact of its RPI decision on the holders of RPI index-linked gilts and bonds and persons entitled to index-linked pensions - the so-called "legacy users" - or decided it was not entitled to take that impact into account. The schemes said, as a consequence of this, the UKSA also failed to comply with its public sector equality duty under the Equality Act 2010.

The schemes additionally said that, in making his compensation decision, the Chancellor also failed to have regard to the interests of legacy users and to comply with the public sector equality duty.

3. The schemes also argued that the UKSA failed to consult the public on its RPI decision and to take into account their views when that proposal was at a "formative stage". It also said the Chancellor failed to consult with legacy users on the issue of compensation and to take into account properly their representations on compensation.

In addition to these key arguments, the claimants also brought a private law claim in the event of the court deciding that the RPI decision is lawful - submitting that the effect of implementing the RPI decision in 2030 would be that RPI will cease to be published and so a cessation clause in gilts issued from 2005 onwards would be triggered. On that basis the chancellor would be obliged to select a replacement index for the RPI.

The chancellor submitted that the clause will not be triggered because, once the RPI decision is implemented, the RPI will still continue to be published.

As such, the parties also asked the court to make a declaration as to whether the cessation clause will, or will not, be triggered.

UKSA powers

The court rejected the first ground deciding that, as a matter of law, the UKSA has the power under the SRSA 2007 to amend RPI by bringing the methods and data sources of the housing cost-based version of the CPI (CPIH) into the RPI. It said that power includes the making of "fundamental changes" to the coverage or basic calculation of the RPI in order to safeguard the quality of official statistics.

It noted parliament had entrusted the power to amend RPI to the judgment of the UKSA as an independent, expert body and had not laid down any express constraints upon the exercise of that power.

The impact of the RPI decision

The High Court rejected both of the claimants' contentions under the second ground.

It said that, as RPI is used in so many different situations, the effect of leaving RPI as it is, or changing it in accordance with the RPI decision, would produce winners and losers in many parts of society and the economy.

The High Court said the inevitable corollary of the claimants' case is that the UKSA would also have to take into account advantages and disadvantages to others, as well as legacy users, as a result of either allowing the RPI to continue to over-estimate inflation or aligning it with the CPIH - adding if this was the case the UKSA would then have to balance those competing interests before it could make a decision to alter the RPI.

It noted parliament has not authorised the UKSA to evaluate and balance such competing interests, or the policy issues to which they give rise - adding that, in relation to RPI, the UKSA was essentially concerned with its statistical quality and its fitness to be used as a measure of consumer price inflation, adding that decisions on whether to use an index such as RPI for certain uses "are for others".

On the claimants' second point - that the Chancellor also failed to have regard to the interests of legacy users - the court said the Chancellor received "ample briefing" from his officials on the effects of the RPI decision on legacy users and the public sector equality duty; something it said was taken into account in his decision that compensation should not be provided out of the public purse.

Failure to consult

The High Court also rejected both of the claimants' contentions that the UKSA and chancellor's failed to consult properly on the RPI decision.

The judgment said the claimants had accepted that their complaint that the UKSA had failed to consult on the RPI decision would fail if they did not succeed on the second ground above - adding they could not complain about a failure by the UKSA to consult on the RPI decision, given that in substance their complaint relates to matters falling outside the UKSA's statutory functions.

But the court also explained that each of three legal bases upon which the claimants argued that the UKSA had been legally obliged to consult on this subject could not succeed in any event.

In respect of the claimants' second point - that the chancellor failed to consult - the court decided that they failed to demonstrate any legal basis for their assertion that the chancellor was legally obliged to consult on whether compensation should be paid to legacy users.

The court added that, in any event, consultees did make extensive representations on the subject and they were fully taken into account by the chancellor.

Cessation cause claim

In its ruling the court also explained why RPI will not cease to be published when the RPI decision is implemented from 2030.

It said that, accordingly, a declaration will be made that that decision will not cause the cessation clause in index-linked gilts issued from 2005 to be triggered.

To read the summary of the judgment in full, click here.