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In 2004, the Office of National Statistics produced its most recent regional retail price indices. These revealed that £100 in the north of England buys 15 per cent more than in London and over 10 per cent more than in the southeast. Despite this, pay in public sector jobs is much the same across the country, with the exception of a modest London allowance.

Presumably, this situation has come about because pay bargains in the public sector are made nationally—and because of the view that fairness implies equal pay for equal work. But in fact, fairness implies equal real…

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