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Disappointment Over Judge’s CPI Ruling

6 December 2011

On Friday 2 December 2011 the High Court dismissed the application for Judicial Review over the Government descision to move from RPI to CPI for the payment of benefits and indexation of pensions.

The decision of the High Court was "That the Government had the power to switch from the Retail Price Index (RPI) to Consumer Price Index (CPI) despite the negative long-term impact this would have on occupational pensioners".

The Challenges and Descisions

There were four main bases for challenging the decision of the Secretary of State for the Department of Work & Pensions that the basis upon which state benefits would be calculated, and therefore public sector pensions would be uprated, be changed from the retail prices index (RPI) to the consumers prices index (CPI) :

  1. Was CPI an index which the Secretary of State was entitled to adopt?
    The Court rejected this argument, on the basis of their view that CPI had become a well-established method of establishing the relative increase in prices.
  2. Had the Secretary of State erred in law in having regard to economic considerations, when considering the switch to the CPI index?
    On this issue, the Court dismissed this on a majority decision. It found:-
    “If the Secretary of State is satisfied that a particular measure is a fair and genuine method for making the relevant determination, so that it can legitimately be said that it achieves the objective of protecting the purchasing power of the relevant benefits and pensions, he can adopt that method even if his reason for preferring it over other potential candidates is that it draws less on the public purse.”
    They went further, to say that even if they were wrong, and the Secretary of State had been obliged to consider the “best” scheme, he would have concluded that CPI did most fairly assess the amount by which pensions would need to be increased to retain their purchasing power.
  3. Had there been a breach of a legitimate expectation?
    This was dismissed on the basis that the Court found:-
    1. That nowhere was the impression given that the requirements of review contained in the 1992 Act were to be encumbered by an inflexible adherence ad infinitem to RPI;
    2. There was nothing said in the negotiations with Trade Unions which amounted to a clear, unambiguous and unqualified representation that RPI would always be the index adopted; and
    3. Even if a legitimate expectation had been established, any obligation to consult which arose would have been satisfied by the process of debate with the Unions that occurred from June 2010 until the making of the statutory Order in March 2011.
  4. Had there been a breach of the public sector sex equality duty?
    It was evident that there had been a public sector equality impact assessment undertaken by the Treasury, but not by the Department of Work & Pensions. The Court found that the duty could be discharged by a Minister if he was satisfied that the relevant equality assessment had been carried out by another Government Department as well or better placed than his own to undertake that task. This was the case here as the other Department (here, the Treasury), had policy responsibility in relation to the matter under review.

The indications are that there will be an appeal to the Supreme Court.