Here, we're comparing the initial expectation with the actual outcome after 15 years. The values shown according to start year (31 December) are “initial expectation” minus “actual outcome” (simple), with positive values implying an over-estimate. This matters hugely because just 1% pa is worth around 25% of a fully RPI-linked deferred liability. We think that is a significant corporate financial distortion.

The expectations have all been based upon a period of 15 years, the approaches being based upon “Bank of England spot”, “Bank of England forward” and “long gilts”. The three possible pairs have been compared.

Over the period of 15 years from the end of 2007 until the end of 2022, all three measures ended up slightly negative, all relatively close to one another. In absolute order, the values were minus 0.3% (gilts), minus 0.5% (forward) and minus 1.0% spot). Over all periods of 15 years, on average, forward (0.26%) was far closer to an accurate prediction than either spot (0.99%) or gilts (1.36%). However, forward (1.01%) was only slightly less variable than either spot (1.18%) or gilts (1.47%), making it best of class but not good enough unadjusted. There is still a bias.