Government statisticians are looking at how the retail price index is calculated because they believe the way the sums are done is producing a number which is higher than is warranted by the actual price rises in the shops.
The review is still underway but there is a supposition that the formula will be changed and RPI will be perhaps 0.5 per cent lower than it would otherwise have been.
RPI is the benchmark for many pension increases and is the index used for inflation-linked bonds, so if it is reduced then so too will be the value of the instruments which use it as a benchmark. In the case of the amount the Government has to pay in interest on its inflation-linked debt we are potentially talking about tens of billions of pounds – which Chancellor George Osborne will no doubt describe as a prudent saving.
The principal losers if this happens will be the pension funds, which have loaded up on the stuff in recent years – largely at the behest of the regulator, who has insisted that they play safe with their investment policy.
An old City hand with whom I had breakfast on Tuesday said that the prices of government index-linked stock – and the few private-sector linkers from the likes of National Grid – have already taken a tumble. No one wants to buy them when they expect their value soon to be cut.
My companion was also old enough to remember how Margaret Thatcher did something similar when inflation was much higher than she wanted it to be. Her solution was to demand that everyone use RPI-X – the index minus housing costs. Or as someone said at the time, inflation minus the nasty bits. This produced a lower number. Then when the house price tide turned and RPI-X no longer looked so good, it fell from favour.
Gordon Brown went one better. He brought in the Consumer Prices Index, a measure where the calculation consistently delivers a lower number.
But even here it was the Conservative George Osborne who decided this should be applied to increases in the state pension.
As my man said: "Governments in trouble always cheat."