Is the South really better off than the North?
In Stoke you can buy a house for a pound, whereas a parking space in London tops £100,000. Up North, sausage rolls are 30% cheaper than down South. A round at the pub in the South East would cover the cost of a complete night out, including kebab and taxi fare, in the North West.
We as a nation are not afraid of reeling off shocking examples to illustrate the differences that divide the north from the south of England. And though some of the gulfs in property prices are wide enough to build an entire estate - and the price of some London pints would bring a tear to the gruffest northerner's eye - the stand-out points of The Great Divide only tell half the story.
It is the devil in the detail that provides the clearest insight into whether it is more expensive to live in the South than it is in the North - the biggest outlays for any family: rent/mortgage, the daily commute, the weekly shop and bills.
Nitesh Patel, a housing economist at Halifax, who incidentally lives in Leeds, says we are limited in our understanding of the cost of living differences as the consumer price index (CPI), which charts inflation for commercial goods, is not produced at regional level by the Office for National Statistics (ONS).
"We imagine the cost of living in the South is greater but we lack the hard evidence of CPI," he says. "House prices and rent are the key areas to indicate the cost of living and those are greatest in the South. The economy has shifted south-east in the past years and decades, away from the industrial North, and towards services and the financial sector – this has had an effect on average earnings, demand for housing and house prices in both regions."
But how exactly do you define the North?
A Londoner will tell you it's anything north of Watford Gap, while someone from Newcastle would wager that Manchester is the southern-most tip of England's northern region. A 2007 study by academics at Sheffield University in association with The Lowry art gallery in Salford found the dividing line ran diagonally across the country from Stroud in Gloucestershire in the west to Grimsby in the east – this would ensconce Birmingham and Nottingham in the North but Leicester and Warwick in the south.
Although this study was several years ago, the primary basis for this invisible dividing line is geographical, so it has not shifted too far.
North versus South: the case studies
To assess what effect the north/south divide has on the respective costs of living, we must consider not just headline figures but all relative income and outgoings. So we have taken hypothetical people from cities further from the line than Leicester and Nottingham – Liverpool, on the north-west coast and hustling, bustling home to the famous Scouse wit - and the trendy and liberal south coast hotspot of Brighton, fast becoming a London satellite city.
Our hypothetical city dwellers are both account directors. Earning £55,000 in Brighton is Peter, taking home £3,239 a month, while Debbie in Liverpool earns £40,000, taking home £2,502
With house prices one of the biggest indicators of a regional divide in the country, it's no surprise that here we see one of the starkest differences. According to Halifax, the average property price is £271,500 in Brighton, and £134,381 in Liverpool, compared to a UK average of £175,546.
This means with an 85% loan-to-value three-year fixed rate mortgage, our Brighton man has monthly repayments on his suburban three-bedroom semi of £1,093, while in Liverpool Debbie has monthly repayments of just £541. For Peter, this represents 34% of his take-home income - but only 22% of Debbie's.
Right from the off, our Liverpudlian is looking better off. A spokesperson for Nationwide, which publishes a monthly house price index, said the cost of a house depends on a variety of factors, including size, design and number of bedrooms, but also the type of neighbourhood and location in the country. Nationwide's most recent house price index showed house prices in Brighton were rising at the third fastest rate in the country, behind just Manchester and London.
In a different scenario, where Peter and Debbie rent city-centre two-bedroom flats, Peter is paying £1,320 a month, 41% of his take home pay, while Debbie is paying £740, just 30% of hers.
Though Peter and Debbie now have a roof over their heads, there are plenty more essential expenditure items to eat into their pay packet. First and foremost, bills. Debbie and Paul both pay their dual-energy bill by direct debit, yet Debbie pays £88.58 a month to Paul's £84.72.
This is predominantly because of the different distribution costs energy providers attach to different regions - the further away from an energy source the more expensive, and the less dense the population the fewer people to share the cost. However, Peter pays more for his water bill - at £36.42 a month compared to Debbie's £34.58.
Debbie and Peter both have home contents insurance - something Ben Wilson, home insurance spokesperson at price comparison site GoCompare.com, says is closely linked to postcode. Debbie pays £54.51 a month, while Peter pays £56.81.
"Home insurers will look at crime statistics in your area to determine the likelihood you may need to make a claim," says Wilson. He says potential flooding is also taken into account and adds installing a security system is one of the ways you can reduce your premiums.
The pair have life insurance, without critical illness cover. Caroline Lloyd, life insurance spokesperson for GoCompare.com, says: "Typically, insurers base their premiums on data available to them, so if you live in an area which is deemed to have a poor overall level of health this could affect the cost of your insurance, as an insurer may take the view you are more likely to become ill." Data has shown that poorer areas, for example, some inner city areas in the North, are often linked to poor health. In Liverpool Debbie pays a premium of £19.58 a month, while in Brighton Peter pays just £16.10 a month.
Away from the essential expenditure is the money that goes towards your quality of life – the pint down the pub, the meal out, the cinema ticket. Matt Chittock, 38, is a journalist and copywriter from Hove, on the outskirts of Brighton. He lives with his girlfriend and three-year-old daughter. He says the saying goes, "Brighton wages, London prices" and that the cost of a pint can top £5 and a meal out can be an expensive foray, "but Brighton has some truly excellent restaurants".
"It's a beautiful place to live," he says. "It's a beautiful place to bring up a child and there's a lot you can do in Brighton for free. We have some lovely parks and the beach. If you're skint, you can always grab a couple of cans, go down to the front and watch the sun set. It's a resort town, a pleasure town - you have to make the decision to pay a little more to live here."
But Chittock says he was only able to purchase his property with his girlfriend during the financial crisis - if he were looking to buy now, he may well be priced out of the market. He works part-time in London, which gives him a foot in the "London wage" camp.
In Merseyside, Emma James, 36, lives with her husband and stepdaughter in Higher Bebington on the Wirral. A case worker at the Crown Prosecution Service, she says she used to spend a lot of time in Brighton for conferences: "I notice there a lot more offers for meals out up here than down there. The cost of food – the weekly shop – is something I've noticed has gone up a lot more over the past few years. There are a lot more Lidls and Aldis around the place now, so we try and shop there."
She adds: "I think we are quite lucky, as the cost of living up here is much less, especially considering the price of accommodation."
Back to our hypothetical case studies, Debbie and Peter, for costs that families might have to meet. Our Brighton resident looks set to pay a lot more for a childminder for the day (£48 to Liverpool's £34). When it comes to booze, wine prices are fairly comparable, but a 70cl bottle of Gordon's gin is going to set Peter back £4 more than Debbie at £18.
After the essentials, from rent to water bills, and typical outgoings from meals out and pints to childcare rates and commutes, where has the lower cost of living? Brighton or Liverpool? Who is better off? Peter or Debbie? Although the Brighton cost of many items is higher than Liverpool, it's vital to remember the average salary is higher. However, it is the largest outgoing – rent and mortgage repayments - that differs most.
Taking into account a mortgage repayment, insurance, water and energy bills and a month's commute (from Brighton to London on the train and from the Wirral to Liverpool in the car), Peter has already spent more than half of his take-home pay, while Debbie just over a third. Though Peter still has more money left, with leisure and childcare costs greater, his money will disappear quicker.
"People in the North do benefit from lower property prices," says housing economist Nitesh Patel. Yes, this means there's more left in your pocket after your accommodation costs have been taken care of - and then the things you want to spend your money on are cheaper. So, though there may be more economic growth in the South East and subsequently more employment opportunities, the cost of living in the North is much less and you will be much better off.
Generally thought of as being interchangeable with life assurance, but isn’t. Life insurance insures you for a specific period of time, at a premium fixed by your age, health and the amount the life is insured for. If you die while the policy is in force, the insurance company pays the claim. However, if you survive to the end of the term or cease paying the premiums, the policy is finished and has no remaining value whatsoever as it only has any value if you have a claim. For this reason, life insurance is much cheaper than life assurance (also called whole of life).
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).
The Consumer Price Index is the official measure of inflation adopted by the government to set its target. When commentators refer to changes in inflation, they’re actually referring to the CPI. In the June 2010 Budget, Chancellor announced the government’s intention to also use the CPI for the price indexation of benefits, tax credits and public sector pensions from April 2011. (See also Retail Prices Index).
Does exactly what it says on the tin: covers the contents of your home for theft and damage and also may insure certain possessions (jewellery, cycles) outside of the home. Things to watch for include the excess and also the maximum payout on individual items. Another grey area is kitchen fittings, as some contents policies say these are not contents but part of the fabric of the property and covered by buildings insurance and some buildings policies don’t cover them because they regard them as contents.
Everything you own: all your assets (property, cars, investments, savings, insurance payouts, artwork, furniture etc) minus any liabilities (debts, current bills, payments still owed on assets like cars and houses, credit card balances and other outstanding loans). When you’re alive this is called your wealth; when you’re dead, it becomes your estate.