03/01/2013 18:05 GMT | Updated 05/03/2013 05:12 GMT

Why Not Use Bank Fines to Alleviate Poverty?

Homelessness and food poverty were points of major debate in the run-up to Christmas; perhaps more than ever this time around.

While the office parties and last minute shopping were going on around them, there was a visible increase in the number of people of all ages sleeping rough and looking for warmth and shelter.

In just one year there has been a 27% increase in Wales in the numbers of those reporting themselves homeless to their local authorities, while the Cardiff food bank alone distributed 2.5 tonnes of food in one week leading up to Christmas. They also claimed to be feeding 70% more people than this time last year.

These increases have come about because of the loss of safety nets in our welfare system that used to protect those at the bottom of the pile, such as a lack of suitable housing and inability to pay rents in the private sector.

The situation is only going to worsen with council tax benefit and welfare benefit changes hitting more families this spring. Some experts estimate that only 20% of the cuts have so far taken place, with the most significant changes yet to come.

The cumulative effect of removing support services - whether financial or otherwise - from the same groups of people who are already in most need could lead to a 'perfect storm' situation as central government cuts the welfare bill and local government cut their services - forcing people onto the streets for the greater goal of reducing the deficit, like some kind of Kafka-esque dystopia which sadly is not made up.

That is what makes the case of UBS' recent £160m fine by the Financial Services Authority (FSA) so galling. It was, effectively, a large slap on the wrist. Barclays, a more household name and a high street bank, copped the brunt of public anger over its attempts to rig the inter-bank LIBOR rating, as we imagined their champagne swilling smugness. But UBS paid out hard cash to deliberately cheat the system.

The punishment must fit the crime. In the past, fines levied by the FSA upon those they monitor went back into the pot, covering the levies paid by other FSA member organisations. Effectively a bad bank given a fine would subsidise those who were acting within the guidelines. But such an approach assumes that there are no general misdemeanours, no cartel-like behaviour, no responsibility to the outside world.

In the case of LIBOR rate manipulation it is difficult to establish precisely who in the general public won and lost - some people might have had better mortgage rates than otherwise, while others might have had worse. But the principle is clear - these banks were moving the system in their direction, for their benefit.

The £160m from UBS is now going to go to the Treasury where, according to a spokesperson, "fines go into the Government's general exchequer fund to be used according to priorities set out in the last Spending Review in 2010."

But there is one place where that money should be going. It should be going to the homeless charities and the foodbanks who are picking up the pieces from the financial crisis - a crisis caused by the banks and exacerbated by the economic position of the UK's major political parties, who all called for major cuts in the 2010 General Election.

The UK government's rhetoric on the Big Society has gone very quiet recently. But homeless charities, such as the Wallich, and food banks from the Trussell Trust, are among those for whom the Big Society has been a 'success', as the UK government create new 'clients' for them and volunteers help out.

Those organisations need the money to pick up the people whose lives were damaged first of all by the banking crisis and then forced into an even worse situation by swingeing and insensitive government cuts.

Telling us that the deficit is the priority when families are homeless and starving shows a government astonishingly out of touch. It needs to back its early promises, and understand that redistributing money to those that need it from those who don't deserve it (some might even say from perpetrator to victim, in a roundabout way) will demonstrate that this we really are all in this together, and that it isn't redundant, dogmatic ideology that is providing the impetus.