The Chancellor is on a collision course with bond markets over plans to change how inflation is calculated. The switch could bring the exchequer a £3.8bn windfall from a reduction in interest payments.
The Office for National Statistics (ONS) will announce on Thursday its recommendation for changing how the retail prices index (RPI) is calculated, the Sunday Times reports.
The move will have big implications for investors, including pension funds, that hold index-linked gilts
The ONS is expected to recommend bringing RPI into line with the other main inflation measure, the consumer prices index (CPI). This could cut RPI by up to one percentage point and slash interest payments to holders of index-linked gilts.
The move would risk alienating investors at a critical time for the bond markets, with Britain's AAA credit rating under threat.
Caring for children and elderly relatives
Similar to June 2007
Square Mile’s series of informal interviews
Fine reduced to £60,000
Two roles created