The bank announced this morning it will be creating 300 new jobs in Glasgow and Edinburgh as it prepares to launch a current account next year.

George Osborne welcomed the move, saying it was evidence that the government’s reforms to the banking system designed to increase competition and choice for consumers “are working”.

“I want consumers to have as much choice as possible and the only way to do this is to encourage new, challenger banks to enter the market,” he said.

“I am determined to create a banking sector that serves the needs of customers rather than the other way round. That is why the government has armed consumers with 7-day account switching, a powerful weapon for them to demand better services from their bank.”

Tesco currently offers credit cards, personal loans, savings, mortgages and general insurance.

Chief executive of Tesco Bank, Benny Higgins said: “Today’s announcement reflects the strong progress we are making towards the launch of our current account as well as creating a significant number of new jobs.

“Healthy competition in banking is essential for the well-being of customers in the UK. The recent introduction of the switching service is welcome in that it removes one important barrier. But real progress requires a cultural shift in the sector away from opaqueness and punishing inert behaviour in favour of transparency and rewarding loyalty.

“The design of the product features and services of our current account has been anchored in the views expressed by Tesco customers around simplicity, transparency, convenience and the need for loyalty to be rewarded.”