By David Milliken

LONDON (Reuters) – British lawmakers have stepped up calls for an outdated inflation measure used for repayment of government bonds, which could reduce investor payments by $ 1 billion. pounds a year.

Inflation-indexed bond prices reached their lowest level in six days after legislators asked statisticians to obtain clearance from the Ministry of Finance to change the way in which it was calculated. the retail price index.

The Economic Affairs Committee of the Upper House of the British Parliament said last month that the errors in the RPI calculation formula represented 0.3 percentage points of the 0.8 percentage points by which it usually exceeds the new measure of Consumer price inflation (CPI).

The UK Statistics Authority (UKSA) has stated since 2013 that the RPI – which also serves to determine student loan repayments and annual increases in rail fares – was no longer tailored to the needs and recommended the following. use of other measures such as CPI.

But to change RPI, the authority must obtain the authorization of the Ministry of Finance. The UKSA indicated that it was reluctant to request the change which, in its opinion, would probably be rejected.

RPI-related problems have been known for years – and have been factored into the price paid by auction investors for more recent issues of inflation-indexed debt – so that changing the formula at present could let the bondholders feel short.

A lawsuit against the UK government is possible with holders of old inflation-indexed bonds if the RPI's formula changes significantly.

Nevertheless, two committees of the upper and lower houses of Parliament said Tuesday that it was time for statisticians to ask Finance Minister Philip Hammond for permission to amend RPI.

"The committee had previously urged the government to abandon the use of the RPI (…) .In the opposite case, the Chancellor should at least give his consent that UKSA corrects the known errors in the RPI formula" Nicky Morgan, chairman of the Treasury House of Commons Committee, said.

A spokesperson for the Ministry of Finance said the government was moving away from the RPI as much as possible, but in some cases it would be "complex and potentially costly".

"The government's goal is for CPIH to become its primary measure over time and reduce the use of the IPD when and where it is feasible," she added. .

CPIH is a newer version of the CPI that includes a wider range of housing costs for homeowners, but is not yet widely used.

The Department of Finance still has a little more than a month to respond to last month 's House of Lords report on the IPD and other inflation measures. He has to announce his annual bond issue plans on March 13th as well as a semi-annual financial statement.

(Report by David Milliken, edited by Andy Bruce and Ed Osmond)