Jim Pickard Darling predicts coalition will link benefits to CPI not RPI

Either Alistair Darling has been reading Alex’s last blog or great minds think alike. The former chancellor has just briefed the lobby hacks on what to expect from tomorrow’s Budget. Top of his predictions was a change in index-linking for benefits from RPI (and the less well-known Rossi index) to CPI. The obvious benefit – as Alex explained this morning – is that the CPI measurement of inflation is usually lower. As a result the government could save about £1bn a year.

Most intriguing was Darling’s prediction that the coalition might tomorrow announce a rise in VAT (a move he sees as inevitable) but not to kick in until either the pre-Budget report. Why? Because then the September inflation index (on which next year’s benefit uplift would be based) would be lower. (A rise in VAT means a rise in prices). Cunning or what?

Darling described the shift from RPI to CPI as one of several ideas lying around the Treasury which – having worked there until 6 weeks ago – he was obviously aware of. Some were more “fit for human consumption” than others, he joked.

Interestingly, the former chancellor was also trying to sound more reasonable about the need for cuts than some other high-profile Labour types. For example, he said the cancellation of the Stonehenge project last week was perfectly reasonable (and he thought he had himself rejected it when transport secretary). Cancelling the loan to Sheffield Forgemasters was not, he argued. This finesse is not quite so evident in the statements of – for example – Ed Balls, who seems to oppose any and all cuts on principle.