Alistair Darling, the Chancellor, accused Iceland's Trade Minister of misleading him about the health of the country's banks in a telephone conversation at the height of Iceland's financial crisis.

But a transcript of the conversation, revealed last night on Iceland's state-owned television channel RUV, undermined Mr Darling's claim that Iceland had refused to honour its commitment to protect British savers.

In the October 7 telephone call, Mr Darling and his Icelandic counterpart, Arni Mathiesen, discussed the collapse of Landsbanki, which operated Icesave, a popular savings operation in Britain. Landsbanki, and Icelandic rivals Kaupthing and Glitnir, have since been nationalised.

On October 8, the Chancellor announced that Iceland would not compensate 300,000 Britons for the loss of about £4.5 billion that they had poured into Icesave.

As a result, Britain invoked terrorist laws to seize the UK assets of Kaupthing. The continuing row over the fate of Britain's savers in Icelance was blamed yesterday for holding up an International Monetary Fund (IMF) bailout of the stricken North Atlantic economy.

In the phone conversation on October 7, Mr Darling mistakes Mr Mathiesen, Iceland's Finance Minister, for Björgvin Sigurðsson, the Minister of Trade, whom he had met in previous weeks.

After being corrected, Mr Darling, referring to the meeting, said to Mr Mathiesen: "I have to say that when I met your colleagues and these others, basically, what we were told turns out not to have been right. I was very concerned about London banking position and they kept saying there was nothing to worry about".

The Chancellor also warns Mr Mathiesen that Iceland's reputation will be hit by a failure to protect British savers.

Mr Darling said: "The problem is that you have people who put their money into a bank here and they are finding that you have decided not to look after their interests. This would be extremely damaging to Iceland in the future."

Mr Mathiesen answered: "Yes, we realise that and we will be trying as we possibly can to make this not a problem. We are in a very, very difficult situation."

But the transcript showed that, contrary to Mr Darling's claims on October 8, Iceland did not categorically refuse to compensate British savers. Mr Mathiesen insisted that Iceland planned to use its compensation scheme, which, under the rules of its membership of the European Economic Area, commits it to paying each saver compensation of €20,887 (£16,462).

He told Mr Darling: "We have the [deposit] insurance fund according to the directive and how that works is explained in this letter [from Iceland's Trade Ministry to Britain's Treasury] and the pledge of support from the [Icelandic] Government to the fund.

Mr Darling answered: "So the entitlements the people have, which I think is about £16,000, they will be paid that?

Mr Mathiesen said: "Well, I hope that will be the case. I cannot visible state that or guarantee that now but we are certainly working to solve this issue. This is something we really don’t want to have hanging over us."

Mr Darling, however, told BBC Radio on October 8: “The Icelandic Government, believe it or not, have told me yesterday they have no intention of honouring their obligations here."

The Chancellor said today that he was left in no doubt following his conversation with Mr Mathiesen that the Icelandic Government would not protect British depositors. "That's why I had to announce that we would step in and safeguard their positionm," Mr Darling said. "Now, actually, they still haven't safeguarded the position of British depositors. I've sent two Treasury teams to Iceland and I'm afraid as of today we still don't have an agreement with them."

So, I'm afraid I was left in no doubt when I spoke to them at the beginning of this month that the British depositors were not going to be included. I'm afraid, as of today the Icelandic government has not done that."

Yesterday the IMF said that the two countries must sort out their disagreement over Icesave before a decision on the scale of emergency support for Iceland can be made.

The IMF's governing executive body met last night to discuss a potential rescue package worth up to £3.7 billion, backed by several Scandinavian central banks and the Bank of Japan. Mr Darling said today that he was continuing to press for compensation for British savers.

"Now we're working with Icelandic government and the IMF, who are porbably going to have to help the Icelandic government, but one of the conditions that I want, is that British depositors' position is safeguarded," he said.

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