Bank customers to be able to transfer money between accounts within hours under sweeping plans to reform the industry

Osborne said choice is a powerful tool to improve markets and customer service

Bank customers will be able to transfer money between accounts within hours not days, George Osborne announced today, as he promised a banking “revolution in customer choice”.

Credit and debit card companies will also be forced to pass on money to businesses in a fraction of the time it takes at present as part of a package of measures to improve confidence in the banks.

It will also be made much easier for bank customers to swap their accounts to another provider while new entrants will be encouraged to come into the market.

In a speech in Dorset Mr Osborne said choice was the most powerful tool we have to improve markets and customer service, reward good companies and penalise poor ones.

“One of the prices we’re paying for the financial crisis is that our banking sector is now dominated by a few big banks,” he said.

“It verges on an oligopoly. I want new faces on the high street. I want upstart challengers offering new and better services that shake up the established players.

“From September this year, every customer of every bank in Britain will be able to switch their bank account from their existing bank to another one in seven days. All they will have to do is sign up to a new bank – and the rest will follow.

All the direct debits, the standing orders, everything will be switched for you with no hassle. This is a revolution in customer choice.”

Mr Osborne also promised a revolution in the payments systems which is crucial to the banking system.

“Why, in the age of instant communication, do small businesses have to wait for several days before they get their money from a credit or debit card payment?” he asked. “Why do cheques take six days to clear?

“Customers and businesses should be able to move their money round the system much more quickly.  Why is it that big banks can move their money around instantly, but when a small business wants to make a payment it takes days?

“The system isn’t working for customers, so we will change it.”

At the same time Mr Osborne announced he would introduce new legislation which, for the first time, will force banks to split up their investment arms from their retail operations.

The move is designed to prevent banks "gambling" with deposit money and allow banks' investment arms to go bankrupt without threatening savers. Any bank which fails to comply with the new rules could be forced by the Bank of England to sell off its investment or retail operations – the so -called "electric ring fence".

The decision to "electrify" the ring fence between customer banks accounts and investment banking is a surprise as Mr Osborne and other senior ministers had previously appeared hostile to the move.

However the Chancellor is thought to have concluded that the proposal, put forward by the Chairman of the Banking Commission, Andrew Tyrie, was necessary to reassure the public the new rules have "teeth" and couldn't be manipulated by the banks in the future.

Mr Osborne also took swipe at the Labour leader, Ed Miliband, suggesting that his anti-bank rhetoric is damaging a vital British national interest. "Any bunch of politicians can bash the banks, chase the headlines, court the populist streak," he said.

"But what good would that do our country? The jobs, the investment, the banking system we all need would go with it. Let's take the anger we feel about the banks and turn it into change to build the banking system that works for us all."

Labour's Shadow Treasury Minister, Chris Leslie, said the Chancellor was being dragged towards a partial climbdown.

"We must see fundamental cultural change in our banks," he said. "If this does not happen then banks will need to be split up completely, as we made clear in the autumn."

News
Russell Brand was in typically combative form during his promotional interview with Newsnight's Evan Davis
peopleReports that Brand could stand for Mayor on an 'anti-politics' ticket
News
The clocks go forward an hour at 1am on Sunday 30 March
news
Arts and Entertainment
The Doctor finds himself in a forest version of London in Doctor Who episode 'In the Forest of the Night'
TVReview: Is the Doctor ever going stop frowning? Apparently not.
News
Voluminous silk drawers were worn by Queen Victoria
newsThe silk underwear is part of a growing trade in celebrity smalls
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebooksAn unforgettable anthology of contemporary reportage
Sport
footballMatch report: Real fight back to ruin Argentinian's debut
News
Candidates with surnames that start with an A have an electoral advantage
newsVoters are biased towards names with letters near start of alphabet
Arts and Entertainment
Isis with Lord Grantham (Hugh Bonneville)
TV
Arts and Entertainment
Jay James
TVReview: Performances were stale and cheesier than a chunk of Blue Stilton left out for a month
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Maths Teacher

£110 - £200 per day: Randstad Education Leeds: Secondary Maths Teacher for spe...

Business Analyst - Surrey - Permanent - Up to £50k DOE

£40000 - £50000 Per Annum Excellent benefits: Clearwater People Solutions Ltd:...

***ASP.NET Developer - Cheshire - £35k - Permanent***

£30000 - £35000 Per Annum Excellent benefits: Clearwater People Solutions Ltd:...

***Solutions Architect*** - Brighton - £40k - Permanent

£35000 - £40000 Per Annum Excellent benefits: Clearwater People Solutions Ltd:...

Day In a Page

Wilko Johnson, now the bad news: musician splits with manager after police investigate assault claims

Wilko Johnson, now the bad news

Former Dr Feelgood splits with manager after police investigate assault claims
Mark Udall: The Democrat Senator with a fight on his hands ahead of the US midterm elections

Mark Udall: The Democrat Senator with a fight on his hands

The Senator for Colorado is for gay rights, for abortion rights – and in the Republicans’ sights as they threaten to take control of the Senate next month
New discoveries show more contact between far-flung prehistoric humans than had been thought

New discoveries show more contact between far-flung prehistoric humans than had been thought

Evidence found of contact between Easter Islanders and South America
Cerys Matthews reveals how her uncle taped 150 interviews for a biography of Dylan Thomas

Cerys Matthews on Dylan Thomas

The singer reveals how her uncle taped 150 interviews for a biography of the famous Welsh poet
DIY is not fun and we've finally realised this as a nation

Homebase closures: 'DIY is not fun'

Homebase has announced the closure of one in four of its stores. Nick Harding, who never did know his awl from his elbow, is glad to see the back of DIY
The Battle of the Five Armies: Air New Zealand releases new Hobbit-inspired in-flight video

Air New Zealand's wizard in-flight video

The airline has released a new Hobbit-inspired clip dubbed "The most epic safety video ever made"
Pumpkin spice is the flavour of the month - but can you stomach the sweetness?

Pumpkin spice is the flavour of the month

The combination of cinnamon, clove, nutmeg (and no actual pumpkin), now flavours everything from lattes to cream cheese in the US
11 best sonic skincare brushes

11 best sonic skincare brushes

Forget the flannel - take skincare to the next level by using your favourite cleanser with a sonic facial brush
Paul Scholes column: I'm not worried about Manchester United's defence - Chelsea test can be the making of Phil Jones and Marcos Rojo

Paul Scholes column

I'm not worried about Manchester United's defence - Chelsea test can be the making of Jones and Rojo
Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

While other sports are stalked by corruption, we are an easy target for the critics
Jamie Roberts exclusive interview: 'I'm a man of my word – I'll stay in Paris'

Jamie Roberts: 'I'm a man of my word – I'll stay in Paris'

Wales centre says he’s not coming home but is looking to establish himself at Racing Métro
How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

A crime that reveals London's dark heart

How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

Lost in translation: Western monikers

Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

Handy hacks that make life easier

New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

KidZania: It's a small world

The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker