Could Jerusalem ever be a rainbow city?

It is a message that he emphasises in the many briefings he gives to foreign officials, such as the one he provided this week to the British junior minister Susan Williams. His views are respected by the British government, for which he acts as an ad-hoc consultant, and he has been rewarded with an honorary MBE.

Although Arabs are visible in predominantly-Jewish West Jerusalem, Mr Seidemann argues that the overall pattern is for Jewish and Arab residents to "live their lives as if a border already exists - they live in different neighbourhoods, shop in different places and study different curriculums".

This is an opinion that is gaining traction among the Jewish citizens of Israel. When pollsters from the Israel Democracy Institute asked members of the public in February whether they "agree or disagree with the opinion that Jerusalem is actually already divided into two cities: the eastern city and the western city," 61 per cent of respondents agreed. The pollsters asked the same question in 1999 and only 44 per cent said that Jerusalem was already divided.

Mr Seidemann, 65, moved from the US to Israel in 1973, six years after the war that saw Israel take control of East Jerusalem, the West Bank and Gaza. He says that this war and Israel's success "changed my life", and influenced his decision to emigrate to Israel. But today he looks back and thinks that Israel's decisions after the war were wrong - a point he makes as an activist and head of the NGO Terrestrial Jerusalem, which critiques government policies.

"I find myself saying today that annexing Jerusalem in 1967 was a mistake," he says. "I do not regret what Israel managed to do in 1967 - we were dealing with a major threat and I've no regrets. I do have regrets about what Israel did with the 'dividends' of 1967."

He is convinced that peace will not come until those post-1967 developments are, at least in part, undone. Part of Jerusalem needs to become Arab-ruled, says Mr Seidemann.

"Anybody who says there will be an agreement with the Palestinians without Jerusalem being divided is lying, being disingenuous, or smoking something," he says.

As far as he is concerned "there may never be an agreement between Israel and the Palestinians, but if there is it will take place inside Jerusalem - it will not bypass Jerusalem".

But, while Benjamin Netanyahu accepted the idea of a Palestinian state in a landmark speech in 2009 - after years in which the Likud leadership rejected the concept - the Prime Minister's position is still that there is no room for manoeuvre on Jerusalem. Last Yom Yerushalayim, Mr Netanyahu made this clear, and he is expected to do so again on Sunday.

"Jerusalem won't become once again a wounded and bisected city," Mr Netanyahu said a year ago. "We will forever keep Jerusalem united under Israeli sovereignty."

Mr Seidemann considers Mr Netanyahu's position on Jerusalem to be bad not only for Palestinians but for Israelis, and specifically for Jerusalemite Israelis.

He also believes that too much energy and too many resources are being injected to expanding Jewish neighbourhoods of Jerusalem, and that this is causing neglect in predominantly-Jewish West Jerusalem. Dividing Jerusalem, he insists, is "not just important for East Jerusalem to heal but also for West Jerusalem to heal".

Jerusalem is not only united but it is providing the foundations on which peace can be built

Interview: Johanna Arbib

To Johanna Arbib, Jerusalem is without a doubt united - but maintaining Israeli rule need not be bad news for Arabs.

As she sees it, Israel's annexation of Jerusalem in 1967 created a single, unified city which, despite differences between populations and their day-to-day patterns, is one.

"When you talk about taking advantage of the city - parks, museums and the like, there is fluidity between east and west," she says.

Ms Arbib, an Italian businesswoman who took the reins at one of Israel's most influential non-profit organisations last summer, accepts that the "fluidity" is limited, and that in day-to-day life many residents of eastern Jerusalem rarely venture to the west and vice versa. But instead of seeing this as a sign of deep divisions in the city, she says that this is inevitable in any large city. "If you travel to New York, Paris or London neighbourhoods are populated by a certain type of people, who tend to stay there," she comments.

Ms Arbib, a veteran of the Jewish communal world, was the youngest person ever to chair the world trustees of Keren Hayesod–United Israel Appeal, the diaspora fundraising organisation for Israel. Now 48, she still lives in Rome but, for almost a year, has been spending 10 days each month in Jerusalem, where she heads the Jerusalem Foundation.

The organisation raises millions of pounds from diaspora groups every year, and spends this on improving the appearance of the city and the quality of life for residents. UK contributors include the Clore Foundation, the Wohl Foundation and the Rayne Charitable Trust, as well as various private donors.

Many Jerusalem landmarks were built by the Jerusalem Foundation, including Teddy Park near the Old City, named after Teddy Kollek, Jerusalem's Mayor for the three decades to 1995 and the man who set up the foundation.

Today, its cash helps to keep activities running at the Abna al-Quds community centre for Arab residents of the Old City and supports the large bilingual school where Jewish and Arab children study together, the Max Rayne Hand in Hand Jerusalem School.

The foundation also helps to provide after-school clubs for youngsters of all religions from disadvantaged backgrounds, and maintain Atta'a, an organisation to advance the rights of Jerusalem Arabs which it established 12 years ago.

Ms Arbib insists that there is no contradiction between working hard on behalf of Arab residents of Jerusalem and insisting that Jerusalem can stay united.

Rather, she argues that it sends out a message that Jerusalem's Arabs can have a bright future living permanently in the state of Israel.

"The work we do helps to support a peace negotiation because if we can show that east and west, Arabs and Jews, can live side by side, it gives an element of hope," she says. Her view is that "Jerusalem is certainly a united city, we want it to have a future as a united city, and it's up to us to ensure it does."

She believes in a "bottom up" approach to peace, and emphasises the potential for education and the experience of co-existence to provide hope.

For Ms Arbib, the key challenges for Jerusalem go well beyond the Arab-Jewish issue and include internal Jewish questions. One of these is the future of the city's less wealthy Charedi population. The Jerusalem Foundation works with partners including the Kemach Foundation, set up by British philanthropist Leo Noé, to help Charedi men gain skills that can help them to enter the workplace.

Ms Arbib is convinced that this process will have a dramatic effect on the city in the future, ultimately making it more prosperous and thereby more attractive.

"If we are able to provide education that allows people to join the workforce, this will have a significant impact on the way the city looks in the future," she says.

Ms Arbib is in no doubt about the potential for Jerusalem to provide a model of co-existence for the world to follow. She told the JC last year: "Jerusalem is the only place where Judaism, Islam and Christianity meet. It is a place where all religions are able to practise their beliefs, and clearly for us Jews it is the place where our history started. It should be taken as an example for humanity to follow."