Middle income families face finance crunch - Labour

LONDON (Reuters) - Families are facing a "cost of living" crisis which will persist for years to come, Labour leader Ed Miliband said on Monday.

Miliband said the expectation that the next generation would always do better than the last was now under threat at a time of rising inflation and growing wage inequality.

Looking at potential remedies, Miliband said that the banking system should be reformed to support business and a range of ownership structures should be considered when the state sells its stakes in high street banks.

The Labour leader accused the coalition government of making things worse for families with children by decisions such as pushing up VAT sales tax and changes to tax credits.

"The crunch will be felt first and worst by low and middle income families, particularly those with children," Miliband said.

The Conservative-Liberal Democrat government has made great use of the phrase "we're all in this together," stressing that the pain of its deficit-cutting measures would be shared by all.

The Conservatives said that families were feeling the effect of Labour's mismanagement of the economy.

"The high cost of living that low and middle-income families are facing is the consequence of Labour's record bust," said Michael Fallon, deputy chairman of the Conservative Party.

Miliband pointed to growing inequality in earnings since 1979 and conceded that Labour had not done enough to tackle this when in power for 13 years until 2010.

"We were wrong not to focus more on the type of economy we were building and what that meant for the widening gulf between those at the very top and the rest."

Miliband said that the sale of stakes in banks such as Royal Bank of Scotland and Lloyds Banking Group would offer a chance for renewal in the sector.

"We should look at all options, including mutuals and private/public partnerships, as they have in other successful countries," he added.