While the progressive flames have been rekindled, we cannot ignore that for those who are being made redundant or repossessed, it's going to be a bitterly cold winter.

After binging on the roulette of consumerism to "keep up with the Jones", people are now struggling to stay even just above water, teetering on the brink of financial and emotional crisis.

The welfare reforms proposed by the government not only proposes to make people work under the minimum wage for income benefits, but the consequences of the reforms will push over the brink many of the people it penalises - parents with young children, carers, disabled people and other vulnerable people.

Credit crunch, social stigma and emotional distress - mixing up a toxic trinity

We make the assumption that focusing on getting people into work helps take people out of poverty - whether it's using the incentive of tax credits and the minimum wage or the threat of cutting welfare payments. But when we look at what's going on the ground, many people find it difficult to find the money or the time to look for jobs. Even when they have found work, many families still face poverty, having to get high cost sub-prime loans because they are refused better value loans. Let's get this straight - the more disadvantaged people are, the harder they're going to be it by the credit crunch.

Many people aspire to be "good families", but face the constant threat of the windfall companies charging them ever more for their basic needs, with benefits agencies telling them to cut corners when they are no more corners to cut and society labelling them "bad parents". This all creates a social crisis of of deteriorating mental health and self exclusion.

Income inequality doesn't only affect spending power, it exacerbates everything else - indeed there is a direct correlation between the rates of emotional distress and income inequality. We may be able to reboot the banks at the touch of a Treasury button, but rebooting people's livelihoods requires a far more radical approach.

Start with the soul not with the handbag

It's not because Ken Livingstone isn't Mayor of London any more that we should stop fighting for free public transport, more social housing or the living wage. But we also need to shift mindsets, we need to look at what people themselves can bring to the table, not just as consumers but as citizens. We need to start with people not with savings, providing the stimulus that revitalises their wellbeing, not just their spending power.

We also need to start changing the arguments. It's not about who is deserving of help or not. It's neither only about defining who is poor or not. It's also about understanding how that poverty is experienced, how people's social and cultural relationships define what they see as their material needs and what they see as socially acceptable - "hard working families" - or not - "benefit scroungers".

Why do you think so many people want to define themselves as anything other than "working class"? Whatever people think Blair meant by "we are all middle class now", many people took this to heart because they felt it could take away the social stigma that had lived with them for so long.

People don't want to feel either deserving of fear or pity. Which is why many try and hide away from the helping hand of the state. Which is they become labelled as "hard to reach" or "seldom heard". Which is why even some of the best services like Sure Start don't reach them as well as they could.

Respect, dignity and hope - nurturing a sense of collective belonging

Recognition and respect are just as important as redistribution. A school which nurtures relationship building is just as valuable as one which nurtures exam success, depending on whether we want to create good little consumers or good citizens.

Recognition that services can be improved by the mutual interests of staff and users working together, not by cutting services. Public services that treat people with dignity, values their contributions and develops a sense of collective belonging.

Although many people find it hard to imagine the possibility of escaping from poverty and social exclusion, that doesn't mean they don't hope. When Obama talks about "being the change we can believe in", it internalises this paradox very well. Their hopes nevertheless constantly battle against the unpredictability of their lives and the fear it generates.

This is why involving users in co-producing public services doesn't only offer greater hope, it allows people to use this hope and energy to work with staff to develop the services that matter to them.

From consumerist havens to safe spaces - from the customer to the carer

People often look back to a golden age where there was a sense of neighbourliness and people took pride in where they lived. But for some people, when they look at where they live, it's little wonder that they escape to the consumerist haven of the Westfield shopping mall or the virtual meritocracy of the X Factor.

We escape the reality of our neighbourhoods and we escape who we know. We feel we've lost our sense of belonging and our sense of trust. We may feel less trustworthy of our neighbours, less attached to our extended or even immediate families, and yet friendship and trust are even more critical in our increasingly atomised society.

We need to create safe spaces for people to talk and look out for one another through better access to mutual support networks and cheaper relationship counselling. Supporting caring, not penalising it.

Outsourced relationships and hidden assets - towards a "reassuring state"

If what we mean by an "active state" is a state that's reassuring, a state that makes us feel more valued and trusted - as citizens and as public servants - then we need to strengthen the intrinsic values that define the relationship between the state and the people it serves.

Yet through how the the state defines its "services", public servants can only engage in specific moments in people's lives which ignore the complexities of the rest of their daily life. This creates assumptions by the "state" which are reinforced by people themselves.

Indeed, for many people there is an antagonistic relationship with the state. They feel assessed and judged from all corners - from their neighbours, the media and the state itself. This fuels a vicious circle of avoiding the state to avoid accusations made by others, about whom they make accusations themselves, that they are somehow "cheating the system". It's not they feel ungrateful, but they feel that the institutions don't understand the realities they live in.

For public servants too, that antagonistic relationship exists, they feel they can't be trusted to serve the public efficiently. The unhealthy compulsion to performance manage, to privatise and to personalise drives them even further away from being able to understand the people they serve.

Rather than continuing to outsource our welfare services with our citizens to companies who we may have to bail out as the recession strikes deeper, we need to re-invest in the emotional and social resources for staff and service users to make the "tough choices" on issues like community cohesion, chronic conditions or climate change. They can work out the tensions between different people's needs and their capacity to participate. Only then can the state show its citizens it is not only "on their side" but working with them "on the same side".

We need to unlock these "hidden assets" of reciprocity and trust and refashion social capital that values these assets as much as more recognised forms of engagement. Of course we need to get people into work. But that means nothing to the communities we serve if we don't help people help themselves by supporting each other, rewarding care rather than penalising it.

Noel Hatch