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On the eve of what is sure to be Alistair Darling's most important political statement there is speculation and counter speculation about how he will address the situation of the UK economy next...
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Wednesday 8th October 2008
The UK government is to cover the deposits of Icesave customers itself, it announced today.
Prime minister Gordon Brown has even threatened to sue the Icelandic government - after it apparently backed out of providing compensation to UK savers.
Icesave is the UK savings arm of Icelandic banking giant Landsbanki.
However, the worsening credit crunch has led to the firm entering administration.
This was bad news for customers, as due to the way Landsbanki is registered in the UK £15,000 of the existing savings guarantee is supposed to be covered by the Icelandic authorities.
Speaking to the BBC, chancellor of the exchequer Alistair Darling indicated that Iceland's government has reneged on its obligation to cover the savings.
"The Icelandic government, believe it or not, have told me yesterday they have no intention of honouring their obligations here," Mr Darling said.
"Because this is a branch of a foreign bank the first call would be on the Icelandic compensation scheme which, as far as I can see, hasn't got any money in it," he added. "The British scheme would top that up to £50,000, but people over and above that would lose out."
"But I have decided in these exceptional circumstances that we will stand behind those depositors so they get their money back."
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