Consumer group Which? has urged Chancellor George Osborne to avoid a U-turn on promised banking reform.

A Which? survey of almost 1,300 adults found that 71 per cent of people were not confident that the Government would act in the consumers’ best interests when implementing banking reforms and 61 per cent said the banks had not learnt their lesson from the banking crisis.

A further 76 per cent said the Government had not done enough to ensure there isn’t a repeat of the financial crisis and 71 per cent favoured a division between retail and investment banks, the option put forward by the Vickers Report.

Richard Lloyd, executive director at Which?, said: “We have seen intense lobbying from the banks since the Independent Commission on Banking report, including a crescendo of scare-mongering over recent weeks on the risk of the end of ‘free banking’ and of big financial institutions leaving the country.

“The Chancellor must resist buckling under this pressure. Plans to ring-fence investment banking from essential consumer retail banking must not be derailed by vested interest and must stick to the proposed timetable so that consumers never again have to foot the bill for a banking bailout that even the banks admit will not be repaid in our lifetime.”

Last week Andrew Bailey, head of the FSA’s Prudential Business Unit, spoke out about ‘free banking’ and how it might encourage the mis-selling of products. He suggested banks should be allowed to charge for their services.

The Financial Services Bill is set to enter the House of Lords on 11 June followed by a White Paper on banking reform on 14 June.