Amid all the talk of pensions and defence, some of the most savage cuts were lost in the shouting – those to the Justice ministry. This will inevitably mean that thousands of inmates are likely to be released early from prison. Think of this what you will – whether you're a woolly liberal or a hang-'em-and-flog-'em type – it's going to be a reality, with many implications, including for banks.
The reoffending rate in this country is truly appalling, with a whole swath of people returning to prison time and again. Better minds than mine are thinking about how to break this cycle of reoffending. But one small way is through reforming banking. Next week, the Prison Reform Trust and Unlock (the national association of reformed offenders) will release a damning report into how banks treat ex-offenders. Without access to a bank account and affordable credit former prisoners can find it impossible to house, clothe and feed themselves in the crucial months following release. No roof means no job and in no time they have returned to their old ways. It's a story repeated every day in this country and it costs us dear, in both money and wasted lives. It is also a situation that is exploited by the loan sharks and drug dealers (who have the cash) who work the nations' housing estates.
Financial inclusion, as it's called, is a subject that many politicians and regulators pay lip service to. The Financial Services Authority has devoted a part of its massive budget to it, and personal finance is even being taught in schools. But, for all this activity, what is the result? One-million-plus people still stubbornly unbanked – which affects not just their inclusion in society, but also the ability of the tax authorities to calculate what they should pay. And, right at the bottom of this pile, are the ex-offenders.
The banking code states that banks should offer a pared-down basic current account to those who would normally struggle to leap the identity and credit-worthiness barriers. But banks have been at best lukewarm on basic current accounts, and in some cases obstructive – after all, where is the profit to be made in these people?
But in these straitened times, one thing we're going to need as a country is action on this. It should start with the part-nationalised banks: let's see them being ordered to actively attract the unbanked, and promote their basic accounts with the same enthusiasm as they do their money-spinning services. And if an ex-offender comes into a branch, to give them a sympathetic ear and sign them up before they go elsewhere.
Tesco heads for money-market
The entry of Tesco into mainstream banking is a step closer. As reported in this newspaper, the supermarket giant is poised to start raising money to finance its mortgages through the wholesale-credit markets. Remembering Northern Rock, Bradford & Bingley and the Halifax, which all came a cropper on the wholesale markets, there could be concern that the retail giant is getting mixed up in something it shouldn't. But even with £4bn-plus in savers' deposits, Tesco will need money-market money if it's serious about entering the mortgage market next year, and, to be frank, we need some more competition badly. Three years on from the crunch the market is still desperately distorted – with customers hit with high fees and overly restrictive lending criteria. As Tesco says, "every little helps".