What price yesterday's pound in our pocket?: John Windsor consults the experts, does his sums and works out how cheap (or expensive) it was to live in Britain in the distant past

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In the year 1300 a chicken cost a penny. Six centuries later, a nine- course dinner for two at the Carlton Hotel in London, including oysters, truffled soup, supreme de volaille, ortolans, champagne and liqueurs, cost pounds 2 19s 6d. Were such prices 'a lot of money in those days'? Judge for yourself. The medieval penny chicken would have cost pounds 1.84 at today's prices; the Edwardian binge about pounds 170.

How do I know? Because I spent an hour at the Government's Central Statistical Office with Andrew Machin, head of operations of the Retail Price Index. A visit was necessary because no one publishes a year-by-year table of figures updating old prices - a statistical tool long sought by collectors, historians, chicken-fanciers and gourmets.

The familiar Retail Prices Index (RPI) is not a lot of help because it gives the inverse of the figures we want, charting the rise in prices (inflation) instead of the fall in value (purchasing power) of the pound. Also, as an index, it shows values relative to the base year 1987 (nominal value 100) and not 1994. (January 1994 is 141.3.)

However, with the help of a pocket calculator and a mathematical formula, it is possible to convert the base from 1987 to 1994 so that the RPI for past years is expressed in terms of its present-day purchasing power. A 1984 pound, for example, is equivalent to pounds 1.58 today. Multiplying a price by the 1994-base RPI for its year gives its 1994 value.

Example: it is said to have been possible before the Second World War to visit the music hall, buy a cigar and a meal afterwards and still have change from a shilling. The 1994 value of a 1938 pound, calculated as above, is pounds 32. So the 1938 shilling (5p in decimal currency) also rises 32 times, to become pounds 1.60 at today's value. Cheap indeed - if the story is to be believed. Even if the true cost of a night out in 1938 was closer to 10 shillings than one, the calculation still gives a price of only pounds 16. A more believable story is that in 1914 a bottle of whisky cost 3s 6d. The 1994 multiplier for a 1914 pound is 50.2: 3s 6d multiplied by 50.2 becomes pounds 8.78 at today's value.

From recent newspaper reports, quoting historic prices yet groping for an accurate, up-to-date equivalent, I gleaned the following: in the 1530s, the artist Hans Holbein the Younger earned the 'princely salary' of pounds 7 10s 0d a quarter. That would be pounds 2,500 today. Hardly princely. In 1826, Sir Walter Scott, caught up in his publisher's bankruptcy, owed pounds 120,000, 'several million pounds in today's money'. A bit vague. Today's equivalent would be nearly pounds 4.5m. In 1958, Anthony Eden was paid an advance of pounds 100,000 for his memoirs, 'a large amount in 1958' ( pounds 1,144,558, to be precise). In 1961, Thalidomide victims received compensation of pounds 60,000 each, 'about pounds 500,000 today' ( pounds 653,000, actually).

So far, so good. But Sir William Beveridge's cost-of-living index, precursor of the RPI, did not start until 1914. Where do the earlier statistics come from? Victorian and Edwardian students of the cost of living, such as Charles Booth and Seebohm Rowntree, for all their assiduousness, left us no more than statistical snapshots. Mr Machin and I were after a statistical video stretching back to feudal times.

We ended up splicing the three most reliable long-term statistical series we could find. Besides Beveridge (Internal Purchasing Power of the Pound, Table 10, CSO, 1994), Mr Machin chose the year-by-year statistical tables in a classic paper by Professor E H Phelps Brown and Sheila Hopkins, 'Seven Centuries of the Prices of Consumables, compared with Builders' Wage Rates' (Economica, vol 23, pp 296-314, 1956), which collates victualling records of ancient manors, monasteries, Cambridge colleges and the Royal Navy. The third was the Central Statistical Office's own 'unofficial' Prices Index for 1750-1914, a blend of Phelps Brown's prices and others published by a Cambridge historian, Walter Layton, in 1920.

The result is the graph of the value of the pound from 1260, with 1994 as base (equals 100p or pounds 1). To use it, note the date of the price you wish to convert. Read off from the graph the 1994 value of the pound for that year. Then multiply the price and the 1994 pound value for the year to find its 1994 equivalent.

Here are some personal favourites. When launched in 1840 the penny post cost the equivalent of 16p today. In those days, the 'comfort-line' wage was reckoned to be pounds 1 a week, equivalent to pounds 38.44 today. Pub beer cost 2d a pint - 32p in today's money, including duty of less than a tenth of today's 1p. The cheapest pint I ever bought, in 1958 at the Bird in Hand at Gosmore, Hertfordshire, was a mild that cost me 1s 1d. A usurous 6.64d of that (51 per cent) was duty but the updated price is still only 62p. Today's pint - at pounds 1.50 or so - carries a proportionately smaller duty burden, 24p, plus VAT at 17.5 per cent. Brewers kindly note.

Those who ate truffles at the Carlton in 1900 were toffs. But who, in 1300, would have bought the penny chicken? Not a farm labourer - even at a tempting present-day pounds 1.84. Agricultural wages were 1d a day, 2d at the most. Only medieval city toffs - merchants, craftsmen - could afford chickens for the pot. A serf might never buy one to eat. He kept and killed his own. Until the first Tudor monarch in 1485, he had little use for money. He grew his own vegetables on his lord's land in return for compulsory labour on certain days (and often compulsory chickens). His family built their cottage, spun, wove, baked, brewed and bartered.

It makes one wonder if cost-of-living figures can ever mean anything unless incomes are worked into them. After all, the gift of a pound would have meant more to a 15th- century labourer earning pounds 5 a year (albeit equivalent, by then, to pounds 2,500) than to a colossal earner such as Edward, Richard III's son, with pounds 8,000- pounds 10,000 a year ( pounds 4m- pounds 5m today). These days, the same pound would be more valued by an occupant of a cardboard city than by the Duke of Westminster. Through whose eyes should we evaluate it?

The objective valuation device favoured by scholars of the cost of living is the 'basket' of consumables. Instead of calculating an average income which, in inequitable times, might be relevant to very few, statisticians take as their metaphorical constant the human stomach. Assuming that a tenfold increase in annual income will not result in a tenfold increase in the number of hot dinners consumed, they find out what the average person actually puts in his or her shopping basket, make it the base of a price index, then monitor price changes in the same basket.

Phelps Brown and Hopkins reviewed three sets of 'shopping basket' records dating from the 15th to the early 20th centuries. In all three, they found that food accounted for 80 per cent of expenditure. (Fuel and textiles made up the rest.) Their base period, 1451-75, was illuminated by an account book kept by William Savernak in 1453- 60 recording the weekly 40 pence (equal to a building craftsman's wage of about pounds 83) spent by two priests and a servant at Bridport, Dorset, on bread, meat, fish, butter, cheese, malt, hops, sugar, tea and fuel. Until recently, household budgets, like Savernak's, did not stretch beyond subsistence products. Shopping baskets do reflect income.

In 1300 serfs might not have bought chickens - but a medieval RPI shopping basket would not have contained any. Similarly, today's RPI contains no ocean-going yachts. Even a tiny fraction of one, included in a 'representative' basket, would be a distortion because the average household would never buy one.

The first index, in 1914, set up to protect workers from the 'temporary' economic consequences of the war, was a stark cost-of-living index, its 'indicators' mostly food. Alcohol was excluded but tobacco was assigned a grudgingly small weighting (share) of the total spend. The basket included such staples as candles, mangles, back-lacing corsets, tram fares and shirt collars. Today, only 14.4 per cent of the pounds 277.63 weekly basket is devoted to food, so that the statistical boon of the unvarying basket of subsistence products has been lost. Sampling skills must make up for it. The RPI now spans 600 items bought by 7,000 households. The purchases of both pensioner households and the richest 4 per cent are excluded, to make the index more representative of the average household. Among the masses in the middle are hard-up people who value a pound more than others but whose purchasing power (or lack of it) still has a statistically significant effect on the price index.

A change from basic cost-of-living to RPI - a more accurate reflection of an increasingly affluent society - occurred in 1947 when alcohol was admitted to the basket, along with such beyond-subsistence luxuries as books, bicycles, radios and gramophone records. It was the first index to include fresh fruit. Clearly, the basket's contents were changing. But candles were not jettisoned until 1956, along with rabbits, mangles and distemper. In the same year, the RPI introduced coffee, brown bread, rice, pet food, televisions, washing machines and secondhand cars. Video and CD players arrived in 1987. Last year computer games came, saunas and jam tarts went. Foreign holidays were not included by the RPI's advisory committee until last year because of difficulties in calculating seasonal variation. As for chickens: roasting chickens replaced boiling fowl in 1962.

The price changes which have buffeted the basket over seven centuries have been caused by combinations of changes in the supply of consumables, the supply of precious metals used as standards of value, the supply of money (medieval debasement of the coinage, modern monetary meddling), and the size of the population. The Black Death of 1348-49 reduced the population by about a third, forcing wages up, provoking the first wage freeze (Statute of Labourers, 1351, as useless as its successors), the Peasants' Revolt of 1381, and six centuries of political conflict over the cost of living.

Swings and roundabouts have produced astonishing anomalies, such as constant prices between 1790 and the First World War. There were golden ages for consumers: the 15th century, when wages were high and food cheap, and the first half of the 18th century, when industrialisation began to increase the supply and lower the price of manufactured goods, and meat dropped from 5d ( pounds 1.73) to 2d (70p) per lb. Living was cheap in the 1880s, too: income tax below a shilling in the pound, champagne 6s 6d a bottle ( pounds 18), oysters a shilling ( pounds 2.79) a dozen.

Hard times came during the 16th and 17th centuries, when food prices rose sevenfold, and the late 18th century, when prices rose 50- 100 per cent. But today, 'Tudor inflation', a history-book horror story, seems tame compared with 1975's record annual rate of 24.2 per cent. It goes to show that high-taxing governments - the present government spends 45 per cent of the national income - are capable of wreaking greater havoc with the cost of living than belligerent agricultural workers short of the price of a chicken.

A History of the Cost of Living by John Burnett (Penguin, 1969).

(Graphs omitted)