Gordon Brown was talking about bringing in regional pay around the time we were doing some of the original work on our prosperity and inflation project. This is explained more fully in this article I wrote for the Birmingham Post at the time.
One of the main reasons Brown flinched from it, was that that he could not get the official statisticians to come up with regional inflation indices that could have helped negotiate the process. George Osborne seems to think the current situation will allow him to at least start to drive it through regardless. But if he goes through with it, it may have a big effect on the provincial economies. Maybe even the biggest of all his policies.
Had we got proper regional inflation indices in place, my own suspicion is that they would show more serious inflation in provincial England in the last decade than in London and the south east.
18 months ago the Statistics Authority told the ONS to look at the sort of regional and social inflation indices I had lobbied them on.
However, nothing has happened on this yet because the ONS seems bogged down in the problem of including the costs of owner-occupied housing in the Consumer Prices Index. We outlined what they were trying to do, and the problems with it, in an Alternative inflation report of now over a year ago.
However, in the year since they have done very little. We are increasingly thinking that we will have to do some lobbying on the housing issue ourselves because, if they get the housing issue wrong, any new indices may be of very little use. We are considering making this part of the work programme necessary to move this whole project forward again. The importance of housing for living standards in the region is explained here.
In the short run Osborne’s move will make a return to business as usual in the provinces of England even less likely. But from there things could go in any number of directions.
However, if Osborne even only partly succeeds in adjusting pay and pay expectations, it means that there will be greater diversity in wages and prices across the UK, and there will be a greater need for more regionalised policies and statistics.