I share the view of the Pro-Housing Alliance in their submission to the Parliamentary Commission on Banking Standards: the moral collapse in the banking industry began in the 1980s when Parliament deregulated lending, abolished rent controls and allowed the free movement of capital in and out of the UK. It is as if Moses went back up Mount Sinai, deregulated the Ten Commandments – and then wondered why there was so much theft, etc. The Libor scandal is the culmination of a long period of deterioration during which making profit overrode morality.

The Zacchaeus 2000 Trust serves the very poorest citizens of London struggling with a complex benefit system. The abolition of rent controls by the 1979 government, about which the 1997 government did nothing, hit housing benefit claimants very hard when the bankers’ bubble exploded in 2008.The massive increase in private sector house prices, due to reckless lending into a market in short supply, had contributed substantially to the increase in rents and therefore in housing benefit payments; they rose in billions every year, from £5.4 billion in 1986/7 to a planned £19.7 billion in 2007/8 to £21 billion in 2009/10, simply increasing the profits of private landlords.

This was obviously unsustainable. However, when the crisis hit in 2008, instead of reintroducing rent controls to hit the landlords who had profited billions from housing benefit, the Labour government introduced the Local Housing Allowance, which capped housing benefit and forced many tenants into rent arrears with threats of eviction. Then, in 2010, the Coalition turned up the pressure of rent arrears on those with the lowest incomes by introducing the housing benefit caps. In 2013 the Welfare Reform Act will introduce an overall cap of £500 a week on benefit payments, which will particularly damage large families living in high-rent areas. That is on top of the reducing value of social security and a new council tax benefit scheme which will be run by local authorities; there are anxieties that it will be a new poll tax.

The consequences are debt and forced migration. Z2K runs the Next Door project, which is dedicated to helping tenants in Westminster hit by the 2010 housing benefit caps. The manager, Romin Sutherland, reports that he has engaged with a number of particularly difficult cases, including: a family whose 10-year-old son has a terminal brain tumour – they recently moved into temporary accommodation; a family receiving 24-hour support from social services because neither parent is currently well enough to care for their 10-month-old son – their future remains uncertain, and the likelihood is diminishing every day that we will be able to house them close to the schools and hospitals they rely on; a family comprising a mother who has been diagnosed with paranoid schizophrenia and two young children, both with developmental learning difficulties – they also recently moved into temporary accommodation, but over 11 miles away from where they were previously.

Some of the families are choosing overcrowding to make the rent fit the cap. Parliament has been oblivious to research which shows that overcrowding damages the health and wellbeing of families and the educational progress of children. Professor Peter Ambrose presented this research in the report Housing Our Future, launched by South London Citizens (SLC) in 2009. It dealt with the incidence of overcrowding in the homes of children attending four primary schools in Wandsworth in south London. The situation first came to light in May 2008, when a parent with children at a primary school raised with the local priest and a teacher the shockingly overcrowded and damp conditions in their home.

The family of five was living in one room, in a flat which had been declared unsafe by environmental health. The private landlord was refusing to carry out repairs, and the family still had five people ahead of them on the Council waiting list to be rehoused. Both parents and children were suffering damage to their physical and mental health. It is estimated by the Centre for Mental Health that mental illness cost the economy £105 billion in 2009/10.

Many sad stories have been revealed, among them a man and wife sharing one-bedroom with their four children: three boys, aged 12, 9 and 18 months and a girl aged 7. For this he pays £240 a week. The children have no space to play, eat properly or do their homework. The husband said: ‘My oldest boy…has to leave home at six in the morning to go to school to do his homework, even in the winter.’

In 2008 the Government Office for Science reported in their Foresight Report, Mental Capital and Wellbeing, that recent analyses have indicated that ‘out of control debts are the crucial mediating variable between low income and mental ill-health, and it may be that financial control is also a critical factor in mental wellbeing’. They also report that ‘there is a very marked increase in rates of the different disorders with increasing numbers of debts’.

The cost of parliamentary and financial sector recklessness over the past 30 years has fallen disgracefully on the poorest citizens and their children. It goes a long way beyond cash, cutting deeply into their health, wellbeing, education and future employment prospects, which creates costs for the taxpayer.

This article originally appeared in Coracle, the quarterly magazine of the Iona Community.