The Squeezed Middle: How To Build A Fairer Economy

In this member post, Jeevun Sandher – a member of the Young Fabian Renewing and Reforming our Economy Policy Commission - reflects on how Labour can build a fairer economy.

Most of us have a vague idea of what the “squeezed middle” is. However, a precise definition seems to elude many in the Labour movement. Understanding precisely who this group is and designing economic policy to promote their interests is the key to building a fairer economy.

To define the “squeezed middle” we could do much worse than to look at the work of the Resolution Foundation, an organisation working to improve the lives of people with low-to-middle incomes. For them, this group constitute about 11 million working adults who tend to earn less than the median income but are above the bottom ten percent in the income distribution.

In short, they are people who are neither too rich nor too poor. They are too wealthy to get substantial state support, but too poor to flourish in an open market economy. Increasing amounts of them are unable to buy homes, and struggle with household bills. More than half have less than one month’s income in savings and face comparatively higher rates of inflation (due to the basket of goods that they buy).

However, the real tragedy for the squeezed middle is that while the economy grew by 11 % between 2003 and 2008, the median wage remained static. At the same time, those on higher wages saw their pay packets increase and executive pay rose exponentially. The squeezed middle saw their living standards reduce at a time when the economy grew and productivity rose, giving the lie to the neo-liberal idea that people are paid their “marginal product” – that the wage chosen by the market is a fair wage.

This problem runs straight to the heart of Labour’s “fairness” strategy. By and large, these are people who work hard, do the right thing, but still struggle to stay afloat in an increasingly precarious economic climate. Meanwhile, CEO’s saw their pay rise dramatically in the decade before the financial crisis and bankers continue to take home multi-million pound bonuses.

The challenge for Labour at the next election is to construct a vision that rewards hard work and shapes a free and fair economy. There is no silver bullet, however. What is needed is a raft of policies to build an economy in which all gain when there is growth.

To begin with, those in the squeezed middle tend to be those with low-to-medium level skills. Any economic strategy must be focused first on investment in education, in order to build up human capital. Given the increasing returns to education we have seen in the past 30 years, this is just common sense.

However, it is important to note that this does not merely mean reducing tuition fees. As a recent IFS study has pointed out, those with similar A-level grades tend to go to university in the same proportion but it is much less likely that the poorest students will get the top A-level grades. Earlier intervention is key (e.g. Sure Start, the pupil premium etc.) to promoting social mobility and building people’s skills.

But this should just be the beginning. For too long Labour has accepted the Thatcherite free market consensus as gospel, and only aimed to tweak it at the edges to help those on low to middle incomes with measures such as tax credits and lower basic tax rates.

It is time to consider and undertake more radical measures. We must design policies which create better corporate governance structures as well as more accountability and transparency surrounding pay in the private sector. Only then can we ensure that all people will share in the proceeds of growth and be paid a fair wage. Hopefully, with these goals in mind we can create a compelling economic vision that helps us win the next election.

Jeevun Sandher is a member of the Young Fabian Reforming and Renewing our Economy Policy Commission.

Labour and the World: The Rational and the Romantic

Yesterday evening the Young Fabians hosted a round table as part of our Labour in the World Policy Commissions with Labour MEP for London Mary Honeyball. The meeting got a little stuck on the tactics of how Labour talks about Europe, rather than the political direction for Europe. Specifically, the question discussed was: how do pro Europeans make the case for EU membership in a net contributing EU member state?

There seems to be two approaches: the rational and the romantic.

Of the large net contributors to the EU budget, the French and Germans seem to fall on the romantic side, they hold a deep routed historical and ideological commitment to the European project following the aftermath of WW2. However the significant CAP and Structural Funds they share between them bend towards the rational. The Italians have the EU to thank for ridding them of the Lira, another rational argument. But what has Britain got to shout about? And will it be rational facts or romantic ideals that will work to make case for EU membership in any potential future vote on the matter?

During our period in government, departments successively made the case for Britain’s EU membership rationally and dispassionately, dealing with hard-headed facts. We spoke about trade, jobs, market access and a single set of market rules all meaning British companies and jobs are better off with Britain in, even if we pay more to the budget than we get back in hand outs (the rebate included). So our position in effect was (and largely still is) this: we pay more in, but without it, we’d be poorer. So in effect, EU membership is an indirect fiscal benefit to the Treasury and thus UK taxpayers.

So far so rational, but it’s not exactly going to send people rushing to the polling station to cast a yes in any prospective future referenda. So what is?

Do we need instead need to break the issue down to the emotive and evocative, using stories and images backed up by hard-headed facts?

The image that Europe, a continent that had been in conflict for centuries, has been at peace for over half a century is strong but it doesn’t seem as relevant today as in the last century.  But twin that with the rational facts of our inter-dependent trade and we might just have a script.

So to tell a story evocatively, as well as dealing in rational facts, Labour should weave a narrative of Britain needing to stand on the world stage with others and not alone, needing to draw on the resources of others to forge a way forward, needing to help those in their greatest need and a Britain that looks outward not inward and to quote a phrase, looking forward not back.

Brian Duggan is Young Fabian Policy Officer.

You can find out more about the 2011 Young Fabian Policy Commissions by clicking here.

Introducing our 2011 Policy Commissions

The Young Fabians will soon be launching four Policy Commissions. Our Policy Commissions form the backbone of our policy work and since their inception they have increasingly become strong access points for our members into the policy making process of the Labour Party.

This year we launch the Commissions at a crucial time for Labour. With a thorough examination of party policy under the stewardship of Liam Byrne MP, there is a timely opportunity for our members to take a firm grasp of the chance to offer Labour our ideas on the party’s policy renewal. The process we are undertaking will be a vehicle for our members to develop their ideas and test their suggestions which we will offer into Liam’s Fresh Ideas policy review.

Over the coming months, four Young Fabian members will lead informed debates and discussions, open to all Labour supporters which will result in our submission to Labour’s Policy Review and a Young Fabian Pamphlet setting out our ideas for Labour’s future policy offer.

Our four commissions will look at:

1. Renewing and Reforming Our Economy – Maneesh Sharma and Graeme Henderson

The task of this group will be to investigate the path Labour should take to build a more sustainably prosperous economic settlement for Britain. It will investigate the need for an active industrial strategy, the fairness divide in our economy, job creation and productivity. It also will look towards opportunities in the green economy and in new and emerging markets as well as looking to incentives for business to break out of the ‘low pay low skill’ cycle.

2. Building Stronger Communities - Richard Angell and Anas Sarwar MP

This group will look at the strength and resilience of British community life in the modern world. It will investigate how families across the country are working harder for longer for less. The consequence of this for family life and community activism will be explored. It will also look at the challenge of how communities are empowered into the political process so that citizens become stakeholders in their communities and in national life.

3. Securing the Future of the Next Generation – Joani Reid

Ed Miliband has stated that “the British Promise, that the next generation would always do better than the last, is now under threat like never before.” The key challenge of this Commission will be to investigate how young Britain is coping with the consequences of government fiscal retrenchment. Facing debt, a difficult labour market and a challenging housing market, the next generation of Britain is under huge pressure. This commission will look at how Labour should respond to the challenges facing the next generation.

4. Labour and the World – Debbie Moss

Foreign affairs is at transformative moment and this group will explore Labour’s role in the World. It will span aid policy in a time of austerity, to security in the context of defence cuts and the criteria for military intervention in fragile states and the balance between domestic security and external stability. Labour in the World will look at Britain’s relationships to other states and institutions and how we form an ethical foreign policy and learn lessons from past conflicts.

Young Fabian members have much to offer these four big policy areas.

Please sign up to join our Policy Commissions and join in the debate about Labour’s future policy offer.

Together we look forward to offering the Labour Party a series of new, fresh and robust ideas.

Brian Duggan is Young Fabian Policy Officer.

The New Generation: how do we make the economy work for everyone, home and abroad?

Margaret Dantas Araujo, member of the Livelihoods and Resource Security Young Fabian Policy Development Group, uses the comprehensive spending review as a lens to look at arguments made in the just published Young Fabian pamphlet, The New Generation. We are very keen to hear what you think of the pamphlet – please let us know your thoughts by posting a comment. This is the fourth in a series of posts on ‘The New Generation’, which you can read by clicking here.

The ring-fencing of UK aid in the spending review is right and in the country’s interest. Right because even during these austere times we have a moral duty to help the world’s poorest people and in our interest because it plays an important role in making the world a more stable and prosperous place.

But that’s only half the story. The coalition has proposed a significant shift of focus in the aid budget towards failing and conflict-affected states. This approach risks ignoring the fundamental dilemmas of resource scarcity that underlie the real development challenges of the coming decade: the carbon intensive growth that underpins current development gains, the high inequalities present in many middle income economies and the huge increases in urban poverty.

Progressive development policy must begin with these dilemmas in mind, bridging development, environmental and distributive concerns. Failing to address these issues or the series of interdependent, systemic challenges they relate to – energy and food security, jobless growth, climate change, global governance – will leave the UK and developing countries more, not less vulnerable.

The most powerful way that the UK can lead in a changing world is by example. Domestic action towards sustainable development strengthens the moral and political foundations needed for a global role as catalyst and reformer, impacting positively upon the environment and the world’s most vulnerable. Cutting investments in UK renewable energy as the coalition government has done is short sighted and in the long run increases Britain’s dependence on energy imports and undermines our international efforts. Why should other countries invest in renewable energy if we do not?

The UK’s economy should be synonymous with sustainable products, design and construction, clean energy and technology, ethical consumers and attractive, green cities. These would be the true green shoots of a balanced British recovery and it is vital therefore that this moment is used to press for a new, greener, more equitable path to growth in Britain and overseas. The UK should push for the G20 to broaden its sights from the immediate and much needed reform of the global banking and financial system, towards green and equitable growth.

Without such leadership the $70 trillion held by investment funds ready to invest; such investment could help the least developed countries leapfrog dirty development by building low carbon energy infrastructure. Such investment could spur growth by investing in communications systems, such as broadband, that encourage entrepreneurship by enabling people to connect market information and local knowledge, enhance opportunities for civil society organisation and help in the provision of efficient and effective basic services.

This post originally appeared on Left Foot Forward.

The New Generation: what do we want workplaces and the economy to look like?

Chair of the Work and Families Young Fabian Policy Development Group, Josie Cluer, highlights key issues from her chapter in the just published Young Fabian pamphlet, The New Generation. We are very keen to hear what you think of the pamphlet – please let us know your thoughts by posting a comment. This is the third in a series of posts from the authors of ‘The New Generation’, which you can read by clicking here.

To win again, and win again soon, Labour needs to be seen as a party of government. Therefore, we need a compelling alternative economic strategy to address the economic reality. Anyone who opposes every cut in public spending is in denial of the economic situation. We must articulate how we would deal with the economic crisis differently from the current government. This must be based on fairness: cuts should be spread evenly across the income spectrum.

Perhaps in the past Labour has been agnostic about the kinds of industries and the kinds of jobs that we want in Britain: as long as the economy is booming, the reasons don’t matter. But the crisis in the banking sector showed that our economy was too dependent on the financial sector; and the cuts to be implemented will demonstrate that it is too dependent on the public sector. Similarly, our values should warn against an economy over-reliant on the grey, informal economy, which routinely exploits its low skilled, low paid workforce, and offers little progression or hope for them.

As we begin to recover from the recession and build the economy again, there is an opportunity to reshape the economy to be more resilient, as well as better for jobs and communities.

Our ambition should be for Britain to lead the world in the industries of the future. This does not mean “picking winners”; it requires a far more subtle approach. But all government actions – not just those in industry – contribute to the willingness of enterprises and industries to invest and develop in Britain.

Ed Miliband should consider:

• An inward investment review to understand fully the factors which drive investment in the kinds of high skill, high value industries we want
• Policies which incentivise parts of the economy we want to grow, like green industries, social enterprises and the creative economy.

Similarly, Labour should not be agnostic about the kinds of jobs we want. Our ambition should be for fair and satisfying workplaces.

New Labour’s vision of economic efficiency and social justice should remain our ambition. Faced with the challenges of an ageing population, emerging economies and globalisation, Britain’s economy cannot afford to have so many people out of work. At the same time, many who do not work are prevented by a labour market that is insufficiently flexible to enable them to juggle work with families and other responsibilities. Every mother who chooses not to work because she’s fed up of the inflexibility her employer gives her to look after her kids if they’re off school sick is a blow to the economy. And it’s unfair on her. Every older worker who is denied a job because the employer worries about him being a bit slow up the stairs is a blow to the economy. And it’s unfair on him. And every person whose employer cannot give him the flexibility to manage his mental health problems is a blow to the economy. And it’s unfair on him.

Ed Miliband should initiate a joint union-employer commission on “fair workplaces of the future” looking at:

• How unions can improve the workplace
• Parents working rights
• Technology
• Mental health at work
• Working hours
• Older workers

Labour has long won people’s hearts through its vision about the kind of society we want to live in. By being bold about the kind of economy we want, and the kind of jobs we want, we can win people’s heads back too.

This post originally appeared on Progress online.

The New Generation: how can we transform the Labour Party?

Chair of the ‘Transforming our Party’ Young Fabian Policy Development Group, Jessica Studdert, outlines the arguments she makes in her chapter in the just published Young Fabian pamphlet, The New Generation. We are very keen to hear what you think of the pamphlet – please let us know your thoughts by posting a comment. This is the second in a series of posts from the authors of ‘The New Generation’, which you can read by clicking here.

The election of a new Leader with a clear mission to set a new direction, for a new generation, gives everyone in the Labour Party the opportunity to consider how we operate and interact with each other and with our communities. 

As progressives, we are by our nature in a rush to get things done. We have a sense of mission and urgency, and we always strive for more. This is as it should be, but increasingly in the recent past our mission has been led and defined by an overweening centralised electoral machine, one that has taken us far from where we started as a political party that was an organic expression of the Labour movement’s values. 

The entire institutional dynamic of the Labour Party is best characterised as that of a marketing-professional company. Communication with the electorate focusses on extracting data and then pummelling people with information. The central party retains tight control over campaign method and message delivery, and defines only narrow measures of effectiveness such as voter ID volumes. 

The last election witnessed the limits of this approach. Now Labour must effect a cultural shift that allows us to become a community-embedded movement party. Since Obama surged to victory in the US two years ago, this concept has become very in vogue in Labour circles, but too often it is a tag applied to the old way of doing things and rendered meaningless.

We need to rediscover a relational sense of politics, that recognises and rewards interaction and dialogue with members, supporters and the public. Put simply, we need to turn identification and broadcast off, and turn conversation and reciprocity on. The top-down structure of our party needs to be turned on its head so that the focus of central party and regional office activity is capacity building locally. 

CLPs need to be given the freedom, and where needed the support, to develop a culture and practice of constant campaigning, building and sustaining links with the wider community. CLPs who recruit supporters, build relationships and develop networks of interest locally should be rewarded with more money, more independence, and greater weight in the policymaking process. 

CLPs should be supported to become effective campaigning organisations. Job descriptions for each officer post would enable individuals to understand what is expected of them and allow members to hold them to account. Term limits for officers of 2-3 years would better develop the talents and skills of those who hold positions and allow more opportunity to progress. Training and advice, peer support and shadowing opportunities, would help individuals develop their CLPs and realise their potential locally. 

The new Leader should consider initiating a strategic review of the Labour Party which would consider the functions and effectiveness of the party at all levels, and how they interact with each other – branch, CLP, regional, national, the PLP and the Leader’s office. This process could also analyse trade unions, affiliates and successful movement-based organisations such as Hope Not Hate to identify strengths, greater potential for coordination locally and to build capacity. 

The Labour Party can only ever prosper when it is an expression of a vibrant, diverse and active base that has high levels of visibility, trust and interaction with our communities, providing a channel through which individuals can express their values and a link between the leadership and the electorate.

This post originally appeared on LabourList.

The New Generation: what do you think?

Young Fabian Vice Chair and editor of ‘The New Generation’, Adrian Prandle, introduces the Young Fabians’ 50^th anniversary pamphlet, which was launched by Rt Hon Douglas Alexander MP in the House of Commons. We are very keen to hear what you think of the pamphlet – please let us know your thoughts by posting a comment. This is the first in a series of posts from the authors of ‘The New Generation’.

When Ed Miliband, in his first leader’s speech, told Labour Party Conference that a new generation had taken charge, ears pricked up. He spoke of a new generation ‘idealistic about our future’ and ‘not bound by the fear or the ghosts of the past.’

The Young Fabians – and the four essays in our just published 50^th anniversary pamphlet – epitomise this new generation. We bring not just a new generation of ideas to the centre-left, but also an optimism, an ambition, and a determination about what government and society together can achieve. As Douglas Alexander, in his speech to launch the pamphlet, said: “Don’t underestimate the motivation, inspiration and insight that young thinkers, activists and participants have in our collective future.”

At a time when the potential of a mass membership movement is being recalled, the Young Fabians are ahead of the game. Our involvement in Labour politics may focus on ideas and participating in change, but in publishing this work we have also developed a highly participatory model of policy development.

The four Young Fabians policy development groups that have been meeting since May have utilised the heartbeat of our organisation: members. Members who individually, and collectively, are both doers and thinkers. The belief in collectivity, central to the movement, should never again allow us to forget the value of participation.

This is a key theme of our work on Labour Party reform. From participating in a functional policy-making process, and participating in driving change in our communities, to ensuring a boost in participation of the full diversity of Labour’s members, we must speed up in replacing command and control with listen and learn as the basis for action.

And so, Young Fabian members, involved and empowered, have presented their policy ideas in a variety of fora: meetings, magazine articles, blog posts; to politicians, to experts, and to each other. We have run wiki-policy experiments, and held online meetings bringing in passion, expertise and experiences from the breadth of the country, not just from within the Westminster policy world.

The policy development groups met in a unique context: with Labour out of power for the first time in most Young Fabian members’ political lifetimes, coalition government may well have brought ‘a new politics’, and, still in the aftermath of the global economic crisis, public services begin to feel the harsh impact of the new government’s extensive and ideological spending cuts. The results are impressive, and the pamphlet pushes for party reform and offers policy recommendations across a diverse set of areas.

Change starts at home, which is why Jessica Studdert, Chair of the Young Fabian special project group, Transforming our Party, argues for a vibrant, diverse Labour Party, utilising its members to respond to the issues of the modern world with relevance and innovation and to provide a link between leadership and wider electorate.  In The path to green and equitable growth, Adam Short presents the case for a holistic approach to dealing with the interdependent challenges of energy, global governance, and developing economies and livelihoods. Chair of the Young Fabian Work and Families policy development group, Josie Cluer, calls for a proper definition of the fairness Labour represents, a new economic narrative, and a willingness to transform workplaces and family life. In the final contribution, Young Fabian members Bren Albiston and Dan Harkin discuss the interrelation of aspiration and education, and look for a commitment of involvement and participation from beyond the education sector – in families, in communities, in trade unions and in business – with the support, not control, of government. Each chapter is packed with ideas.

Take these ideas to your CLPs, your union branch meetings, your community campaign groups. Write about them, talk about them – and let us know what you think.

This pamphlet presents new ideas for a new leader of the Labour Party – but also for the whole movement. Change is needed and together we must participate in that change. The new generation is ready and able.

A similar version of this post was published on LabourList.

More in the litany of disregard for women

Christine Quigley, member of the Young Fabian Work and Families Policy Development Group, argues that the coalition government should not take support for granted from women who benefited so much under Labour.

Today’s announcement on Child Benefit cuts for higher-rate taxpayers is the most recent example in this Government’s litany of disregard for women. Osborne’s announcement today (well-timed to bury media coverage of the latest revelations on Andy Coulson) means that households where one earner takes home £44,000 a year will lose out on this valuable universal benefit. What is missing in this debate is an analysis of how the cuts will affect inter-family dynamics.

Many UK households still follow the typical male-breadwinner model, with the husband or male partner earning the main income, and women working part-time, on lower incomes, or not at all. (The full-time gender pay gap still sits at nearly 17% forty years after the introduction of the Equal Pay Act.) For those women who don’t work, either through choice or necessity, the Child Benefit payment may well be the only money directly paid to them, as Katherine Rake points out. An income of just over £20 a week may not seem like much, but it allows a measure of control and independence. A plethora of academic studies such as Lundberg, Pollak and Wales (1997) point out the common assumption that family incomes are pooled, so that the distribution of income within the family doesn’t matter. The same study finds that the move from tax credits (generally received by the father) to Child Benefit (paid directly to the mother) in the UK saw greater expenditure on children’s (and women’s) clothing.

Once again, the Con-Dem Government hasn’t taken equity between men and women into account. We already know, thanks to Yvette Cooper, that women will bear the brunt of spending cuts from this year’s Budget, but an impact assessment from the Treasury is sadly unavailable publicly.

Conventional political-science wisdom holds that women are inherently more likely to vote for conservative parties. It may well be that the UK’s Conservatives are banking on our support – but selling women down the river won’t win our votes. Let’s not forget Labour’s achievements for women; from the Equal Pay Act and national minimum wage, to better maternity pay, Sure Start, free breast cancer screening, support for victims of domestic violence and increased political representation for women. Today’s cuts are symptomatic of what the Con-Dem Government really thinks of women – we must stand for progressive policies.

Doing well by doing good: we need more Social Enterprises

As part of the Young Fabian Work and Families Policy Development Group‘s work looking at the future of labour markets, here PDG member Daniel Bamford argues that Social Enterprises present a perfect way of bridging the gap between hardcore capitalist and government provision.

In case you didn’t know, we are in a bit of a financial pickle. Whilst there is a clear and pressing need to continue Labour’s record of investment in public service provision, the coffers are empty. The tax take is down and likely to remain so according to IFS, OBR or any other oracular acronym we care to consult. Traditional methods of public sector procurement look increasingly unaffordable as we head into an austere winter but turning and fleeing nakedly to the markets to provide social goods is clearly not the answer.

Over the past 10 years a hitherto dormant giant has been asleep. Now it seems the Social Enterprise (SE) sector is waking up. The SE sector, broadly defined by a desire for both economic and social returns, encompasses all the space in the spectrum between hardcore capitalist provision and government provision.

The Social Enterprise sector represents a huge opportunity for us to radically and progressively re-shape our public service provision. We can save money, improve service delivery and create new meaningful jobs in an economy that needs an injection of dynamism.

Some Social Enterprises are for-profit and believe you can do well by doing good. Take Innocent Smoothies: responsible sourcing, 10% of their profits go to charity and the company makes money.

Other Social Enterprises are non-profits but may choose to generate significant income to further their social goals. The charity I co-founded, Business Bridge, sees income generation as a more sustainable than grant funding. Any income we earn is ploughed straight into broadening our social impact. We do good by doing well.

The success of organisations such as Cool2Care in child disability caring and Teach First in education show that innovative Social sector organisations deliver results as well as compelling arguments. There are currently more than 55,000 Social Enterprises active in UK. Together, they turn-over over £27bn and employ 5% of our workforce. Social Enterprise already makes a huge contribution to our economy but we really should be asking it to make a much larger one.

Labour’s creation of the Office for the Third Sector in 2006 is one of the prouder achievements of the UK civil society movement in recent years and should have been the start of something big. Unfortunately the Office is no more, only 4 years into its existence the ConDemers have, erm, condemned it.

New Social Sector legal and financial vehicles have led to innovation that should be placed at the heart of UK’s public service provision plans. And it is a shame that, at a time when it would make sense to expand the sector, it now faces a real struggle for survival. During the great recession we have seen that markets can be a force for bad. Now let’s see them unleashed as a force for good. For good.

If you would like to know more, please feel free to read a summary presentation I have recently put together on the third sector.

Daniel works for and co-founded Business Bridge, a charity helping entrepreneurs in South Africa, Ghana, UK and India.

Cutting Housing Benefit is a false economy

Earlier this month, the Young Fabian Work and Families Policy Development Group looked at the issue of housing, here PDG member Catriona Hatton finds that the arguments for and against cutting housing benefit all point towards the need for more housing.

In June George Osborne announced that a new housing benefit cap would be introduced in an attempt to slash the cost of housing benefit, which has risen sharply to £19.6 billion per year from approx £11 billion in 1997. The cap places an upper limit of £400 a week on a four bedroom house and £280 for a two bedroom property in rented private sector.

In favour of the cap, there is a strong argument that leaving housing benefit uncapped increases the housing benefit bill, since landlords effectively set the rate at which the benefit is paid. If Government willingly pays housing benefit at the price set by the market, landlords have incentives to set the rents as high as possible, since raising rents will not affect the tenant’s ability to live there. The result is tax payer’s money going to the benefit of private landlords in the buy-to-let market, an upward pressure on property prices for all, and an ever increasing housing benefit bill.

However the arguments against the cap, in my opinion, far outweigh the arguments for it. The impact of the cap will have devastating consequences for recipients, particularly in London and the South East where in many places it is simply not possible to find quality housing at the rate set by the cap. In addition any future increases in the cap would be linked to consumer price inflation rather than increases in rental prices, reducing the real value of the allowance.

Importantly the social mix of the London would be drastically changed, with thousands of families being forced out of inner London, causing greater disparity in wealth between different parts of London. Overcrowding will occur and new slum areas are likely to develop, resulting in the less well off being geographically cut off from the wealthy in society.

All evidence shows that separation in this way lowers life opportunities, for instance due to inferior access to education and employment opportunities and lack of connections. In addition there would be greater pressure on schools and social services in other areas as a result of a sudden influx and overcrowding.

It is argued that the cap will increase incentives to find work. However this is unfair on recipients who are not able to work such as pensioners, people with serious disabilities, and also on those recipients who are already in work but it is too low paid for them to cover their rent fully.

The root cause of the escalation in the housing benefit bill is the under supply of affordable housing and addressing this would be the most beneficial solution. The priority should be to create more affordable homes through the building of council housing, the expansion of housing association schemes, private investment through subsidies and through the expansion of shared ownership schemes. Only when the supply of affordable homes is increased will it be unnecessary for the tax payer to subsidise high private sector rent. Unfortunately the cap will only serve to worsen the problem as waiting lists for council housing and housing association homes lengthen, and ultimately it will push people into poverty.