The chairman of the influential Treasury Committee has called on the Chancellor to prevent an "absurd" cut to the amount of savings protected if your bank, building society or credit union goes bust.
From 1 January 2016, the UK's savings protection limit will fall to £75,000 per financial institution – a decrease from the current £85,000 limit.
The cut is taking place because the pound has got stronger against the euro. The Europe-wide limit on protection is staying fixed at €100,000. See the Government savings protection to be cut MSE News story for more on what's happening and why.
However, Andrew Tyrie, chairman of the Treasury Committee, which examines the expenditure, administration and policy of the Treasury, HM Revenue & Customs and associated public bodies, has criticised the move.
In an open letter to Chancellor George Osborne, which was published today, he calls for Osborne to press the EU to enable non-Eurozone authorities to set their own protection limits.
Tyrie writes: "It is unacceptable to a country such as the UK, in the EU but outside the Eurozone, to be forced to change the level of depositor protection frequently. Fixing deposit guarantees to a volatile variable like the exchange rate puts savers at the mercy of the fluctuating euro.
"This unpredictability may deter saving in the UK and distort the savings market."
He finishes: "Much greater discretion can and should be left in the hands of the non-Eurozone authorities. I am writing to ask that you press for it."
The cut 'is absurd'
When the cut to protection was first announced Tyrie branded it "absurd", saying: "It is absurd that the 16% depreciation of the euro largely brought about by the crisis in the Eurozone in general, and the Greek crisis in particular, should be forcing a reduction in the level of protection available to UK depositors."
The protection limit being reviewed every five years also irked Tyrie, who commented at the time: "This is not the only unacceptable aspect of the Directive. It is supported by EU legislation which could inflict changes every five years, or even more often than that."
When the changes were announced, the Financial Services Compensation Scheme, which is the fund that covers consumers' cash in the UK, said the move will still protect more than 95% of all consumers, as the majority tend to have £50,000 or less in savings.