TAX officers are negotiating with UK banks over tax-avoidance schemes for customers that are estimated to have cost the Exchequer more than £3 billion.

The news comes as David Cameron prepares to urge world leaders to sign up to stringent new international tax agreements at this week's G8 meeting in Northern Ireland, and just days before a long-awaited report by a powerful Westminster commission on how to reform the banking sector.

HMRC is currently investigating ways to limit the creation of avoidance schemes by UK banks.

But Lord McFall, a member of the Parliamentary Banking Commission, which will deliver the reform report, called for them to be scrapped altogether.

He said: "These tax-avoidance entities in banks should go because they are not consistent with the purpose of banks."

Banks set up the arrangements for customers and then enter into negotiations with the Treasury over whether it considers them valid.

Former West Dunbartonshire MP Lord McFall said the head of HMRC had sent him a letter "which indicated there is about £3.2bn of these tax-avoidance schemes which are up for negotiation. The banks have established them; HMRC are looking at them."

Ahead of the commission report on banking standards, he said: "The banks can show they are changed by agreeing with the Treasury to end these schemes." He called for talks to start within months, adding: "Otherwise it can take seven to 10 years and so the Exchequer loses out with inflation and whatever else."

The exposure of the scale of the schemes under discussion comes as the Treasury tries to agree to another round of massive public spending cuts.

Chancellor George Osborne has tasked Whitehall departments with finding cuts worth £11.5bn.

Today, Mr Cameron will also try to use the G8 to push forward plans for an EU-US trade deal No 10 estimates would be worth £10bn a year to the UK.

The UK has set the three Ts – trade, tax and transparency – as key goals for the international summit.

But campaigners have questioned the international will to clamp down on tax avoidance. They point out that over the course of the two-day summit £1.4bn will flow from developing countries into tax havens.

Lord McFall also warned more bankers should face jail.

He said: "If governments don't ensure that appropriate legislation is passed - it would be hard to provide confidence in the system. The public want to know that if somebody committed a misdemeanour, they have to be responsible for their actions."

He also called for better regulation of the financial services industry and warned the entire culture of risk needed to change: "No regulator in the world was able to anticipate this crisis and catch it. Therefore you have to accept in many cases the regulator is always behind the curve.

"So what you need first of all is the cultural change in these banks, the individual accountability for the banks but also regulation, which could be less but which is more simple and direct."

He warned against increasing complexity, saying it could often offer the "illusion of control".

And he suggested the Coalition Government's much-hyped new regulatory system was suffering from that illusion, with the propensity for complexity and overlap increased.

He said: "For me, the issue is not so much the architecture of the system but the relationship of people within the system, talking to one another and understanding the issues and not occupying their individual silos."

He also said his commission needed further evidence to decide if RBS should be split into a good and bad bank, an idea that has won the backing of the outgoing Governor of the Bank of England, Sir Mervyn King. But asked if the public would get back the £46 billion it pumped into RBS, he appeared doubtful.

"The Chancellor and the Prime Minister have a problem here in that in their over-eagerness to sell the branches they are trying to kid on that Labour paid too much," he said. "But when you are in Alistair Darling's position at the time and you get a call from RBS in the morning that they are going to run out of money in the afternoon, it was an act of courage and sense."

Last night a spokesman for HMRC said: "The use of avoidance schemes by the banks is at an historically low level due in large part to the Banking Code of Practice. HMRC is consulting on further strengthening the Code to ensure that banks will not be tempted to engage in avoidance in future.

"Most of the total relates to the period before all the banks signed up to the Banking Code in 2010 when the use of avoidance schemes by banks was much more prevalent."