The government says the cards, which would contain biometric data, would help stop identity theft, which costs about £1.3 billion sterling a year.
Britain's government re-introduced a controversial bill to bring in identity cards today, legislation that had to be put aside earlier this year when Prime Minister Tony Blair called the May 5th election.
"The abuse of identity actually costs this country billions of pounds a year," Mr Blair told parliament. The government also argues ID cards would help track terrorism, illegal immigration and organised crime.
"Across the world there is a drive to increase the security of identity documents, to safeguard borders and reduce threats from overseas," said junior Home Office minister Tony McNulty.
"The plans set out today will ensure the UK is at the forefront of that drive," he added. But critics, including some Labour members of parliament, say cards pose a dangerous threat to civil liberties.
They argue the scheme is too costly, especially as it is still unclear how effective ID cards will be in tackling crime and terrorism.
"The horrendous economic costs of the ID card scheme are clear; the social costs will be with us for decades," said Shami Chakrabarti, director of human rights group Liberty.
With Mr Blair returned to power with a sharply reduced majority, some political analysts believe the government faces a battle to get the bill through parliament. Labour left-wingers could block the plans if enough of them join forces with the opposition parties.
When former Home Secretary David Blunkett introduced the original bill in the last parliament it sparked a Labour revolt. The Home Office has made only minor changes to the bill, including giving more powers to the watchdog and limiting access to the national identity register.
The Liberal Democrats oppose ID cards and although Conservative leader Michael Howard has backed the idea, he is stepping down.
David Davis, the shadow Home Secretary and a favourite to replace Howard, has said he would not recommend the legislation in its current form to Conservative MPs.
The Tories initially voted for ID card legislation, but later abstained in a key Commons vote. The cards will not be compulsory and police will not have the power to demand to see a card.