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Leading article: A reform that does not benefit the capital

One of the most disturbing consequences of the Government's cuts is that councils in outer London and on the South Coast are reportedly block-booking accommodation in preparation for the likely flight of low-income families driven out of the city by the Chancellor's new cap on housing benefit.

One again, we are reminded that some of the Coalition Government's superficially attractive reforms, aimed at tackling abuses in the welfare system, come with a hefty social price tag. Because the Government has no way of forcing private landlords in central London to lower rents, the result of the cap, which takes force next spring, will be an exodus of the poor from the rich centre to the periphery and beyond, changing London's social landscape forever.

George Osborne's argument – that taxpayers should not be expected limitlessly to indulge the desire of families on housing benefit to remain in the expensive city centres – has a simplistic logic to it. Money can obviously be saved by moving families on benefit from Mayfair to Dagenham, in Essex, or Hastings, in East Sussex, where rents are lower.

But the savings made to the budget are relatively modest, and need to be weighed against hidden costs that may emerge only over the long term. We need to ask whether we want the capital to go the way of Paris, which over recent decades has evolved into a city divided starkly between a wealthy overwhelmingly white centre and poor, mainly non-white, suburbs.

Inner London's social as well as racial diversity has been one of its greatest assets, a source sometimes of tension but also of creativity and inspiration. By effectively, if unwittingly, socially "cleansing" the capital's centre, we risk losing a priceless part of a world city's heritage.

From the other end of the spectrum, it is far from apparent that the Government has even considered the impact of its reforms to housing benefit on the boroughs that are to receive these families. They will clearly need more money, not only to re-house the incomers but to cope with the problems likely to attend families that have been uprooted from areas in which they grew up and cast down in unfamiliar communities.

It needs to be asked whether it is desirable to load boroughs and towns that are already rundown and have a high percentage of people on benefit with more of the same. Once again, images of France's lawless, turbulent banlieues hove into a view as a warning of what happens when the poor and the unemployed are herded into virtual ghettos.

This week will be dominated by economic questions. As The Independent reports today, figures from the Office for National Statistics are likely to suggest that our tentative economic recovery is already faltering. At the same time, business are gathering to respond to the Government's call for the private sector to take up the slack caused by the axing of almost half a million public-sector workers. Cue for more ideological mud-slinging between the Government and Labour over whether the cuts are pulling Britain back from bankruptcy, or pushing it into a "double-dip" recession. The arguments cannot be proven from either corner because we cannot know what position the economy would be in today were Labour still in power and pursuing different economic policies.

But it would be a pity if largely theoretical arguments about cuts dominated the national discourse to the extent that we failed to see what was going on right under our noses in sectors such as housing. The Government's logic over the housing benefit cap deserves to be contested. If we fail to do so, the changes to our social fabric could be so far-reaching that they would be impossible for any government to modify or reverse.