The Conservatives have accused Chancellor Alistair Darling of "piling confusion upon confusion" over his attempt to restore confidence in banking after last month's run on Northern Rock.

Mr Darling has guaranteed savers 100% compensation for deposits of up to £35,000 if a British bank collapses.

And he has indicated he will consult on possible legislation to extend the guarantee to £100,000, despite warnings this could impose excessive pressure on the banking industry, which will be expected to fund the scheme.

But shadow chancellor George Osborne accused him of "mishandling" the crisis and its aftermath. He said: "What people want in a period of financial instability is certainty, not fiddling."

Liberal Democrat Treasury spokesman Vince Cable added: "The Government's chopping and changing commitment to deposit guarantees is so confusing that it seems likely it will undermine stability rather than reinforce it.

"People who have lost money from their occupational pensions schemes and Equitable Life policyholders are angry that they have been treated less favourably than those people with savings in Northern Rock."

And the British Bankers Association has warned against further increasing the amount of savings covered by guaranteed protection to £100,000.

Chief executive Angela Knight said: "I think we have to be careful of ramping up to those sorts of figures, because that would be a very expensive thing to do, and if it is very expensive then ultimately, of course, there will be consequences in terms of costs, charging structures and so forth."

Stephen Haddrill, director general of the Association of British Insurers, added: "We agree that savers should be offered the possibility of 100% compensation up to a higher limit than at present. That is one of the lessons of Northern Rock. But the Government has now set the limit at the upper end of what is sensible.

"A limit of £35,000 will cover well over 98% of all savers and is broadly in line with arrangements for investments and other savings.

"If the Government pushes the limit further upwards it risks distorting the savings market, providing a guarantee for risky investment strategies and adding to costs for customers."

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