Wednesday’s strikes were a stand against the government’s decision to change the way in which public pensions are protected against the effects of inflation.

Previously, the government had used RPI, the Retail Price Index as a judge of how inflation might affect pensions. The government is now using the Consumer Price Index (CPI) instead and unions have argued that this change will lead to pensions not being worth as much. Furthermore, they argue that the change has been made a result of wanting to cut the country’s deficit rather than for the interests of those concerned.

Both CPI and RPI are methods used to measure inflation. Since RPI takes into account interest payments on mortgages it is generally a more favourable measure than the former. Even if the methods did measure the same things the differing calculation methods mean that the figure for inflation using CPI will always be below that for RPI. This more favourable figure is then used when the government calculate the rates for pensions.

Clearly the change means that the government will save billions of pounds. The judge commented that the use of RPI in previous years was simply the practice, not so much a promise that it would continue.

The Office for Budget Responsibility has estimated that the difference between the two measures will continue to rise and it is possible that a typical pension using the CPI rather than the RPI might lose out on nearly £40, 000 over the course of 20 years. Remembering as well the increase in the life expectancy of individuals in general and it is easy to see why it was so necessary to axe the default retirement age.

In addition to the move affecting pensions, if the CPI measure is also used when calculating benefits and tax credits the government stands to save further billions of pounds over the years. This is particularly true since it has been estimated that the gap between the two measures will continue to grow in future years.

The Social Security Administration Act gives the government power to make decisions affecting social security, such as pension schemes and tax credits. It was the argument of the unions that the government had overstepped its powers granted by the Act. The unions are considering an appeal on the decision given that it was acknowledged by some of the judges that the decision was economically based, that is, that the Chancellor was overly concerned with cutting the deficit.