Moves announced in the budget to guarantee everyone has access to a basic bank account would mean up to one million more people having access to an account over the next five years, the chancellor said.
According to a Treasury taskforce, around 1.75 million adults do not have a transactional bank account, more than half of whom are among the poorest fifth of the population, with many either retired or too young to pay national insurance.
Basic accounts enable people to receive credits, such as wages or benefits, and can be used to set up direct debit accounts, with some allowing use of a debit card.
The government's announcement to make banks legally obliged to provide such accounts was met with muted response by the banking industry, which said it already offered everyone access to a basic bank account. It also stressed it had exceeded its joint target, set with the government in 2003, to halve the number of people who did not have an account. The number of unbanked households fell from 3.57m in 2003/04 to 1.75m in 2007/08.
"Everybody can have a bank account if they want one, unless, and this is rare, the law says they can't," said the British Bankers' Association. "In recent years UK banks have worked with the government to cut financial exclusion, halving the number of households without a bank account. Every month 40,000 more people open basic accounts."
Basic accounts do not offer a cheque book or overdraft facility, though some do have a £10 buffer zone. There are almost 8m in the UK. The thinktank Financial Inclusion Centre said the move would allow vulnerable consumers to benefit from direct-debit facilities, which can often give them access to considerable savings on energy bills. Consumers excluded from these kinds of accounts could be missing our on savings of about £1,000 a year, it said.
But, said David Orr, chief executive of the National Housing Federation, the needs of the customers rather than the needs of the banks must be paramount.
"The government is right to put an obligation on banks to provide free basic accounts to every UK citizen," he said. "However, it must ensure these accounts meet the needs of low income families, rather than the needs of the banks.
"Having a bank account will allow hard up families to access the cheapest utility deals, spread the cost of repayments for household goods, buy products online and get pay cheques paid directly into their accounts."
The Community Development Finance Association (CDFA) welcomed proposals to ensure that banks help to provide more services to people on low incomes. Under the proposals, banks will have to provide "adequate support" to non-profit lenders, such as community development finance institutions, which provide loans to people who cannot get finance on the high street.
The government will shortly consult on whether this help will be imposed through regulation or funded through a new levy on retail banks.
Bernie Morgan, chief executive of CDFA, said: "This could be a major win for people on the lowest incomes, as well as the community development finance institutions, which provide them with financial services when the banks can't help."
But on the requirement for banks to offer everyone a basic bank account, he said: "A guaranteed basic bank account will help many people, but it is not a silver bullet to end financial exclusion."
