It has emerged that the UK Government knew in July 2008 of the instability in the Icelandic banks (and indeed The Herald’s Alf Young mentioned the situation in an article in that paper on 28th March) .

The question will be raised as to why it then did nothing to advise individuals, local authorities and charities that their investments with these institutions might be at risk. Such a question, while understandable, is unrealistic. Any action of this kind would itself have accelerated these banks – any bank – into insolvency.

It is legitimate, though, to ask why the Government did not confidentially approach the Government of Iceland in July and explore how these institutions might be regularised then, in what would have been good time.

The fact that the UK Government has had the Iceland banks in their sights as potential failures since July exposes the shallow gamesmanship of Gordon Brown’s grandstanding threats to sue Iceland and applying anti-terrorist law to enable the seizure of Icelandic banks’ UK assets.

The true situation was underlined today when the nature of the ‘British delegation’ to Iceland to discuss the state’s financial obligations was clarified. This was not the high level delegation we were allowed to assume. Alastair Darling was in America for the G7 conference and Gordon Brown was in the UK. The delegation to Iceland was composed of civil servants with officials from the Bank of England and the Financial Services Authority at a less than stellar level.

If the UK Government felt that there was an opportunity to reclaim significant funds from Iceland to reduce its losses in protecting UK savers with these banks, this would have been a top rank delegation. That the delegation was low key is proof that Gordon Brown’s threat to sue the little country has always been, as we said, no more than gesture politics, in plain language – a stunt.

Savers are now protected. Local authorities will simply have to be protected too, as will charities. The Government is unlikely to recover any serious percentage of costs in its 100% rescue of UK investors in these failed banks. That is its own fault. It had notice of the situation back in July. A proactive government could – should – have used this information discreetly to get these banks in better order before the financial system hit the wall.