Are some regions of the United Kingdom ‘cheaper’ than others, in the sense that a given basket of commodities can be bought in them for a smaller outlay of money? Moreover, are such differences, if indeed they do exist, persistent over time? This chapter attempts to provide answers to these questions. If both were answered in the affirmative, then a policy of paying nationally determined unemployment benefits might have, depending upon their region of residence, significantly different consequences for the real incomes of the unemployed and so affect their participation in the labour market. Despite the importance of these questions there is no regional component to the Retail Prices Index (RPI), which is the main, and most prominent, measure of price movements in the United Kingdom.
In attempting to shed some light on this area of darkness, this study used regional price data provided by the Reward Group. These data were used in conjunction with weights derived from the Family Expenditure Survey (FES) to construct regional retail price indices. Both the data and the construction of the weights are described in section 5.2. Differences in regional housing costs might be expected to play an important part in determining cost-of-living differences between regions, and so section 5.3 is devoted to a discussion of the many problems associated with their measurement.