Meanwhile, Alistair Darling is said to be demanding Northern Rock’s bosses carry the can for the banking crisis. The Chancellor is said to want senior managers, including chief executive Adam Applegarth, fired in order to send out a clear message to other banks that reckless lending will not be tolerated.

There were also reports that Bank of England Governor Mervyn King’s position could be in jeopardy over the affair.

Gordon Brown’s spokesman insisted yesterday that the Prime Minister retained “full confidence” in Mr King.

“He worked very closely with him when he was Chancellor. He thinks he’s done a very good job and is a very highly regarded figure around the world,” the spokesman said.

However Mr Darling was more guarded when pressed on the same issue simply saying that he and Mr King were “working closely together”.

Former Tory Chancellor Ken Clarke said: “I did not expect to see the Government ever having to reassure worried savers with money guaranteed by the tax payer. 

“The response should have been clearer and quicker. It shouldn’t require queues of pensioners down the high street before the Chancellor says something.” 

Financial expert Martin Lewis, creator of Moneysavingexpert.com, said: “I think the indication from the Chancellor is very clear – that any solvent bank would get the same protection as Northern Rock. It would be impossible for them to turn away anyone else.”

The Government’s reaction also appeared to conflict with the stance of Bank of England Governor Mervyn King.

Speaking just before the crisis broke last week, Mr King urged central bankers around the world to avoid bailing out firms that got their fingers burnt.

Describing it as a “moral hazard,” he said said it “encouraged excessive risk-taking and sows the seeds of a future financial crisis”.

Northern Rock yesterday reported a drop in the number of people withdrawing money. It coincided with a slight recovery in its share price, which finished the day up 8 per cent.

The Newcastle-based lender said there had been short queues outside just four of its 76 branches, in marked contrast to the long queues seen in recent days, when customers withdrew an estimated £3billion.

At the same time, it said its call centres were receiving just 9 per cent of the volume of calls they were getting the previous day, with 80 per cent of the people contacting the bank wanting to reinvest their money.

The group is even trying to tempt customers back by promising to refund any account charges or transfer fees people incurred as a result of withdrawing money because of the crisis if they reinvest it in the same type of account by October 5.

Fellow lender Alliance & Leicester - whose shares fell 31 per cent on Wednesday - saw them gain 32 per cent yesterday.

Sir Callum McCarthy, chairman of the Financial Services Authority, risked angering Northern Rock customers who queued for their savings by describing their behaviour as “irrational”.

In an interview with the BBC, he said: “We are in strange and exceptional circumstances. It is difficult to legislate on questions of confidence.

“Northern Rock is solvent with a good mortgage book. It would now be irrational to worry about your deposit following the guarantee.”

The Bank of England said it had pumped an extra £4.4 billion into money markets to ease the pressure on overnight lending markets between banks, where rates have soared since it stepped in to secure Northern Rock last week.

Despite moves by the Government and Northern Rock to reassure customers, some people still began queuing outside branches as early as 2am to get their hands on their money.

Pensioners Peter and Doria Watson, from Claygate, Surrey, who were waiting outside the group’s branch in Kingston-upon-Thames, south west London, said they did not trust the Government’s assurances.

Mrs Watson said: “I want to draw my money from my savings account. It may not be much but it is a lot to me.”

Joyce Hutton, from Southfields, south west London, who said: “I was here yesterday but the queue was too large. I have another account and want to empty my savings into that.

“What the Government has said gives us more hope but there is still doubt and I am not taking any chances.”

Retired bus driver Roy Hughes, 64, started queuing outside the Northern Rock branch in Liverpool city centre at 2am to withdraw nearly £19,000 from an account he has held for four years.

He said: “Despite the Government’s assurance, I am still sceptical that if the Rock does roll and it’s sold, it will take a long time to get our money.

“I want the money now so I can have peace of mind. I just can’t afford to take the risk.”

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