The UK Government is being called on to fully guarantee all savers’ deposits during the current banking crisis after the Irish Government today guaranteed all bank deposits, regardless of their size.

Nick Clegg, the Liberal Democrat leader, led calls for the Government to issue a temporary guarantee for all savers’ deposits in the British banking system. They totalled £891.6 billion at the end of June, according to the Bank of England.

The present British system fully protects savers' deposits only up to £35,000 with a single bank. The Treasury recently estimated that the limit covered 97% of all UK depositors.

Mr Clegg said: “We are now in the eye of an economic storm. The financial system urgently requires some breathing space. British people need total reassurance that their savings are safe."

“The Liberal Democrats will support the Government in issuing a blanket guarantee for all deposits in the British banking system.”

The Financial Services Consumer Panel, an independent body set up to represent consumers by the Financial Services Authority, the City watchdog, also called for an unlimited guarantee.

David Lipsey, chairman of the panel, said: “That Irish depositors in a failing institution should be better compensated than their British counterparts is a national disgrace.

“We would like to see unlimited compensation. If consumers knew they would get their money back they would have no incentive to rush around risking a run on their bank.”

Ireland's Government granted a sweeping unlimited guarantee on all bank deposits at its six main banks for the next two years, after one of the worst days of trading on the Irish stock market.

Brian Lenihan, Ireland's finance minister, said today he had taken the unprecedented action, which starts immediately, to maintain financial stability after Irish banks' shares collapsed on Monday.

Last week, the Irish Government bolstered protection for depositors to a maximum of €100,000 (£79,400) — more than double the guarantee offered by the UK scheme.

The move could help UK savers as the rule change also appears to apply to savers with Post Office accounts, which are provided by the Bank of Ireland, and other Irish banks operating in the UK, including Allied Irish Bank, Anglo Irish Bank and Bank of Ireland.

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