Yup. Region-agnostic pay should be used to even out disparities. Regional pay will just entrench them.
I'm not so sure that works wholesale, I think raising wages artificially could actually be quite damaging to certain regions, and benefits should be set at a level that allows people to live with dignity in times of need, it shouldn't be an arbitrary figure that gets paid out no matter what your circumstances are. Everything should be better means tested.
I find it hard to believe, in an age where we have world-class economists drawing up all sorts of practical algorithms, that we couldn't find a way to make pay proportional to a number of factors... like, the cost of living (rent/mortgage averages), local fuel and food costs etc... if the most basic pay is set proportionally above that, and I'm not talking a minimum wage - I mean a living wage -- then everyone in every area should be able to save, and plan the use of their money.
I think a benefit to a more overt regional competition on pay would be that companies might actually look outside London if its cheaper in a whole variety of ways to employ people in the North West or something. What I'd be wary of, is companies using cheaper areas for their menial work that will forever be low paid, and dragging down the regional pay average. If regional benefits/allowances became a reality I'd want to see councils be given the powers needed to encourage growth, and avoid their constituencies becoming a ghetto for cheap manual labour or something.
We should be encouraging the growth of our cities and towns outside of London, and that means making them more attractive and competitive for business. On the foundations of that sort of success, regenerating areas, you'll get more mobility and growing affluence. They should build more houses where tight supply is financially crippling the people this government is claiming to help, and where demand and growth potential are high... bring down the high costs people face and the need for high wages, you'll create an attractive environment for jobs...