The official story is that the UK is so much more prosperous than it was a generation ago. But it now takes two incomes to run a household instead of one a generation ago. Gordon Brown believes inflation runs at different rates across the UK and is preparing regional pay settlements. Here, Andrew Lydon of the West Midlands New Economic Group, challenges the Chancellor to focus on the inflation and prosperity of provincial England

According to the official story of prosperity in the UK, we have allegedly become about twice as well off since the Sixties.

UK Gross Domestic Product has grown at virtually the exact same pace as for the USA. You might be expecting to now read that this is the common success of our Anglo-Saxon economic model, which has been the driving force of "Globalisation".

However, the US government has never bothered to hide their official figures for US average hourly earnings, which have clearly fallen over this same period of GDP growth. Had we in the UK had such a full range of economic indicators, we would probably find a similar fall here. This would explain why it takes two incomes to run a household in today’s UK that could be run on one income in the sixties and for much of the seventies.

Back then mortgage providers assumed that lending more than three times the income of the borrower was not a safe and secure practice. In many ways this rule of thumb still applies. So for average households this means more than one earner.

The Joseph Rowntree Foundation has played a leading role in fostering analysis of the housing market whereby house prices are looked at as multiples of local incomes. On this basis the West Midlands Regional Assembly reported even in 2004, that in our region, it was only in Stoke-on-Trent and Newcastle-under-Lyme that one could buy houses for three times average income.

But most people are on less than average income in a society as unequal as ours. The problem is even more stark for newly forming households. In the south of England there are areas were one needs to raise seven times average income, putting ownership ordinarily beyond the reach of even two earners fortunate enough to both be ‘average’ earners.

For those of us who grew up in Birmingham even as late as the early seventies, we knew our households could usually then be run on our father’s income if our mothers did some work it allowed for extras. Had we anticipated a future where mothers worked for comparable incomes to our fathers we would have had difficulty envisioning the great leap forward.

But I am certain it would not have been a society where the Department of Education was arranging supervision for children for the full length of the working day rather than just the school hours. Back in the seventies this would have seemed like something out of the proletarian republic of East Germany. Yet this is what Ruth Kelly was suggesting with her ‘Kelly Hours’ proposal last year – here in the UK.

Freedom for both men and women to have fulfilling jobs is one thing; but both partners in a household being forced to work anti-family hours at the expense of their children because of the mortgage burden, is quite another.

With support from the Joseph Rowntree Reform Trust we have been conducting a feasibility study into whether a make-over of how we signpost the changing prosperity of the people of the West Midlands, could act as a spring-board for a change of direction in central planks of UK economic policy.

We are a small West Midlands based not-for-profit consultancy and think tank, promoting greater use of localisation to obtain social, environmental and economic benefits. By localisation we mean local trade, decision making and money flow. We are rare amongst non-governmental organisations in having an economic focus.

Since at least 2003, Gordon Brown has been toying with the idea of having different regional pay settlements across the UK. Our colleagues in the West Midlands New Economics Group told his Treasury review in 2003 that to go ahead with regional pay on the basis of the existing flawed inflation and prosperity statistics would be to risk an incalculable blow to the standard of living of much of provincial England. Documentation from 2003 can be found through our website.

While regional pay deals are the norm in the USA and Germany, both countries had long established and credible prosperity and inflation figures that are regionalised and localised. This has meant that regional differences are both diminishing and better and more widely understood.

Next Spring, National Statistics (NS) will be opening a regional branch here in the West Midlands, a move that stems directly from the review in 2003. They will also be preparing to become independent of direct government control in the manner in which Brown granted the Bank of England independence in 1997. We will be asking them to use this independence to begin establishing the statistical systems so that a Chancellor can ensure that his inflation target can be thoroughly applied across the UK and across a defined spectrum of households. A future Chancellor could be held to a set of targets like these:

Central England Inflation Targets - All households
Households headed by a key worker 2%
Family 2%
Households 2%
Pensioner households 2%

London and the South East may well also want the inflation that they are suffering also specifically measured and addressed. With the architect of the current system for our monetary management bidding to be our next prime minister, these proposals could be very topical in coming months. Such a regional focus could be adopted by Gordon Brown as the next chapter in what he might call the ‘modernisation’ of the UK economy. His Treasury have had a lot to say about ‘Localism’ in recent years. Otherwise, such an approach could be adopted by those who see themselves as moving us on beyond the modest reforms Gordon Brown set in place.

In September a big BBC poll suggested that three quarters of the UK population did not go along with the idea that Britain was a better place than it was in the mid-1980s. Nearly half of them were clear that it was a worse place. That such a large majority rejected the official story of Britain being a better and more prosperous place surprised even many of us who have long pondered this issue. The cost of living was one of the most important reasons to emerge in the poll, just behind the more frequently discussed concerns about crime and disrespect. This should clearly concern a Chancellor who now seeks to sell himself as the man who put the country’s inflation control structures in order.

Spin is becoming less workable as a response to this public disenchantment. Substance is what will be required. We challenge Gordon Brown to use what may be his final budget as Chancellor to regain a focus on the prosperity and inflation of provincial England. Should he give notice of such a new focus in that budget, it would be the first step towards new economic policies for a new era where the sound bites about globalisation and others long familiar from the Thatcher-Blair era no longer wash.

• Andrew Lydon runs this project for Localise West Midlands and is also Vice Chairman of the West Midlands New Economics Group. Their website is here.