Extend the Protection Offered to Icelandic Savers

It is shocking how badly the Icelandic government has tried to treat UK savers in the past few days. Its behavior has undermined the trust of British savers in all foreign banks; as the results of a poll show, 77 per cent of us say we will no longer save with a foreign bank.

My savings are now planted in UK banks whose deposits are covered by the British financial compensation scheme - and if I had more than £50,000, it would be spread between different banking groups. I recommend you do the same.

But this week has raised another compensation issue. The government has promised to refund all of the money deposited by UK savers in Kaupthing and Icesave, not just the £50,000 they would be entitled to under the Icelandic and British compensation schemes. This is undoubtedly the right thing to do: as one blogger on the Guardian Money site points out, Icesave was authorized to operate in this country, was regulated by the Financial Services Authority for the conduct of UK business, subscribed to the Banking Code and participated both in Iceland's and the UK's deposit compensation schemes. He adds: 'I was investing prudently, not recklessly, and if the bank had no proper compensation scheme, the government should not have allowed it to take deposits here.'

He's right. Yet Mr Darling says other savers must not expect the same protection in the future, if their banks go down.

This is unfair. If the government is prepared to help Icesave and Kaupthing savers, it must extend the same protection to all, including those who stuck to the lower-risk UK banks. Until Darling announces that full protection is extended to all UK savers, they will continue shifting their money around, which is bad for them and for the banks.