Savers who put their money into high-risk banks to enjoy better interest rates should “pay the price” if the bank collapses, according to a Warwickshire MP.

John Maples (Con Stratford) criticised Government plans to repay money lost by customers of Icelandic banks.

He said encouraging people to invest in high-risk banks – by guaranteeing their savings if it went wrong – would lead to more people taking risks in the future, so that banks with more conservative business models and modest interest rates were unable to compete.

Mr Maples was speaking during a House of Commons debate on the Government’s Banking Bill, which is designed to reform Britain’s financial system to deal with the credit crunch and prevent similar problems recurring.

The Bill gives the Bank of England a statutory duty to promote financial stability, improves protection for depositors and provides new powers to deal with failing banks by transferring them to another private sector purchaser or bringing them into temporary public ownership.

Mr Maples said people who had invested in banks which have collapsed, such as Northern Rock or Icelandic bank Icesave, had chosen to take a risk.

“I have been staggered by the number of constituents and friends who had money in Northern Rock or Icesave - banks which I am sure they had never heard of.

“I had not heard of Icesave until about a year ago. Perhaps that is my ignorance, but I suspect that those friends of mine who had money in Northern Rock had not heard of that 10 years ago.

“People were prepared to risk their life savings for half a per cent. That was a big mistake on their part.

“If we protect them from that, we will pay the price of more and more money going into institutions that are taking higher and higher risks. That is how they earn the extra money to pay the extra interest.”

Officially, the Government guaranteed only the first £50,000 of an individual’s savings, he said. But in practice, the Government had made sure that no private savers lost anything.

Mr Maples said: “When these extraordinary times are over, depositors will have to bear part of the risk of their own choices . . . at present they take no risk at all. The risk has been passed on to the rest of us and, essentially, passed on to the taxpayer.”

The MP was challenged by Labour MP Frank Dobson (Lab Holborn & St Pancras), who pointed out that credit reference agencies had given the banks a good rating, suggesting they were safe to invest in.

Mr Maples said: “Most would recognise that depositing money with Lloyds Bank - at least I hope so in my case - is a slightly safer bet than depositing it with Icesave. Perhaps I am about to get a rude shock.”

Later in the debate, Mr Maples backed tougher regulation of the financial services industries, but warned against casting aspersions against everybody involved in it.

“Not everyone has been a greedy spiv. There are plenty of people in the City doing very ordinary jobs as secretaries, receptionists and computer programmers, and they will lose their jobs too. We need to protect the industry by regulating it intelligently.”

Dudley South MP Ian Pearson spoke on behalf of the Government in his new role as Economic Secretary to the Treasury, and warned that the world was still in the midst of a global financial crisis.

He said: “Recent events are affecting many countries across the world.

“This has been, and still is, a world financial crisis: I am sure that we will look to learn the lessons from it.”