James Daley: Who's to blame for the Icelandic banking mess?

When Gordon Brown and Alistair Darling were talking tough to Iceland a few weeks ago – seizing the UK assets of Icelandic banks and promising to stand behind all UK savers with money in those banks' accounts – I felt a great national pride. After all, the Icelandic Government had apparently told us that they had no intention of honouring their obligations in the UK – even though hundreds of thousands of savers had deposited money in the UK subsidiaries of their banks.

Once the assets had been seized, of course, both banks inevitably collapsed. But with UK savers' money secure, it felt like our Government had done the right thing.

Over the following days, however, it started to become clear that there were a number of victims who were not going to get much, if any, of their money back. For a start, the dozens of local authorities who had stuck council taxpayers' money into Landsbanki and Kaupthing were told they would not be reimbursed by the UK Government. Then there were the thousands of individuals who had put their money in Landsbanki and Kaupthing's offshore operations – most of whom were UK nationals, but who would also not qualify for the British Government bail-out because the Isle of Man and Guernsey are independent territories.

As these angry groups realised that they may be hung out to dry, they began to question whether Britain had taken the right decision to seize the Icelandic banks' assets in the first place.

The answer appears to come down to whether the Icelandic government really ever did threaten to walk away from its banks' UK liabilities. Iceland now claims it said no such thing, and has challenged the British to provide proof that it did. Furthermore, some Icelandic bankers have suggested that had Britain not intervened in the way it did, these banks would not have collapsed at all – and no one would have lost a penny.

The savers who lost money in the offshore subsidiaries of Kaupthing and Landsbanki understandably feel aggrieved. Though offshore banking tends to be associated with wealthy tax dodgers, many of the savers in question were simply ordinary UK citizens who worked overseas and could not open UK savings accounts while they were not resident here. Instead, they opted for banks as close to home as possible – and paid dearly for making the wrong choice. Many now stand to lose their entire life savings, and are furious that their own Government will not stand behind them.

However, if the British Government had not intervened, I would quite agree with Darling's decision to turn his back on these savers. After all, if you put your money in a French bank that went bust, you wouldn't expect the British Government to bail you out. So why should it be any different for the Isle of Man and Channel Islands, which are not really any more a part of the UK than France is? Savers should have checked what protection their money would be afforded. And if they were advised to put it there, and were told it was safe, then they should sue their adviser. But why should Britain bail them out?

If, however, the British Government's actions – which included the use of anti-terrorist legislation to seize the Icelandic banks' assets– were part of the problem, then we must certainly bear the responsibility to compensate these people. Sadly, it may take class actions and years in the courts to ever prove such an accusation, by which time some of those affected will have been forced to declare themselves bankrupt. A sorry situation.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Voices
On the last day of campaigning before the polling booths open, the SNP leader has written to voters in a final attempt to convince them to vote for independence
scotland decidesIs a huge gamble on oil keeping the First Minister up at night?
Arts and Entertainment
Rosalind Buckland, the inspiration for Cider with Rosie died this week
booksBut what is it like to be the person who inspires a classic work of art?
Life and Style
techApple has just launched its latest mobile operating software – so what should you do first?
News
A male driver reverses his Vauxhall Astra from a tow truck
newsThe 'extremely dangerous' attempt to avoid being impounded has been heavily criticised
PROMOTED VIDEO
Arts and Entertainment
Lionel Messi in action for Barcelona
filmSo what makes the little man tick?
Arts and Entertainment
tvReview: An undercooked end (spoiler alert)
News
i100
Arts and Entertainment
Pharrell dismissed the controversy surrounding
musicThe singer said 'the last thing I want to do is degrade'
Sport
Cesc Fabregas celebrates his first Chelsea goal
footballChelsea vs Schalke match report
Arts and Entertainment
Toby Jones (left) and Mackenzie Crook in BBC4’s new comedy The Detectorists
tvMackenzie Crook's 'Detectorists' makes the hobby look 'dysfunctional', they say
Life and Style
fashion

Olympic diver has made his modelling debut for Adidas

News
i100
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Trainee Recruitment Consultant Birmingham

    £18000 - £23000 per annum + Comission: SThree: The SThree group is a world lea...

    Trainee Recruitment Consultant - Birmingham - Real Staffing

    £18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

    Recruitment Consultant - Soho - IT, Pharma, Public Sector

    £20000 - £25000 per annum + OTE £35,000 first year: SThree: The SThree group i...

    Sales Executive

    £20 - 24k (Uncapped Commission - £35k Year 1 OTE): Guru Careers: We are seekin...

    Day In a Page

    Mystery of the Ground Zero wedding photo

    A shot in the dark

    Mystery of the wedding photo from Ground Zero
    His life, the universe and everything

    His life, the universe and everything

    New biography sheds light on comic genius of Douglas Adams
    Save us from small screen superheroes

    Save us from small screen superheroes

    Shows like Agents of S.H.I.E.L.D are little more than marketing tools
    Reach for the skies

    Reach for the skies

    From pools to football pitches, rooftop living is looking up
    These are the 12 best hotel spas in the UK

    12 best hotel spas in the UK

    Some hotels go all out on facilities; others stand out for the sheer quality of treatments
    These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

    Widespread fear of Isis is producing strange bedfellows

    Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
    Topshop goes part Athena poster, part last spring Prada

    Topshop goes part Athena poster, part last spring Prada

    Shoppers don't come to Topshop for the unique
    How to make a Lego masterpiece

    How to make a Lego masterpiece

    Toy breaks out of the nursery and heads for the gallery
    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
    Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

    Ian Paisley’s decision to make peace with his IRA enemies

    His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
    'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

    'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

    Exclusive extract from Janis Winehouse's poignant new memoir
    Is this the role to win Cumberbatch an Oscar?

    Is this the role to win Cumberbatch an Oscar?

    The Imitation Game, film review
    England and Roy Hodgson take a joint step towards redemption in Basel

    England and Hodgson take a joint step towards redemption

    Welbeck double puts England on the road to Euro 2016
    Relatives fight over Vivian Maier’s rare photos

    Relatives fight over Vivian Maier’s rare photos

    Pictures removed from public view as courts decide ownership
    ‘Fashion has to be fun. It’s a big business, not a cure for cancer’

    ‘Fashion has to be fun. It’s a big business, not a cure for cancer’

    Donatella Versace at New York Fashion Week