Ministers ready to force banks to offer 2 million basic accounts

The government is set for a showdown with Britain's high-street banks over the provision of banking services for the low-paid and unemployed.

The government is set for a showdown with Britain's high-street banks over the provision of banking services for the low-paid and unemployed, if it goes ahead with plans to impose targets and increase regulation on the issue.

The Treasury has stepped up its threat to force banks to open basic accounts for the 2 million households which do not currently have any bank account. A task force set up by the Government to tackle the issue of "financial exclusion" has spent the past two months in talks with the financial services industry and is thought to be disillusioned with progress.

Giving the less well-off and those claiming state benefits better access to banking facilities, such as basic accounts, is a key objective of the Government. It has already warned it will consider regulation if there is little reduction in the numbers without accounts by 2007.

The task force is due to report on its findings from the industry later this year, though, and members have alarmed the industry with the hard line taken in private correspondence. It could recommend imposing targets on the number of basic accounts that banks must open.

The high-street banks are understood to be extremely angry at the prospect of legislation on the issue. A number, including Lloyd's TSB, Alliance & Leicester, Barclays and the Co-operative Bank, pledged £182m last year to establish the Universal Bank, a Government-backed bank that operated through the Post Office network to attract benefit claimants.

A spokesman for the Treasury said no decision had been made on whether further regulation was needed by the Government to end financial exclusion.