HAMPSHIRE’S children’s hospice should benefit from a one-off Government bailout for charities which lost millions when the Icelandic banking system collapsed last October, MPs have said.

The Treasury Select Committee said it was ''imperative'' that charities, including Naomi House in Sutton Scotney near Winchester, should be supported ''at a time when more people than ever may be faced with difficult circumstances''.

Committee chairman John McFall said: “The committee came to the unanimous conclusion to compensate charities and this is what we recommended.”

Naomi House lost £5.7m when British bank Kaupthing, Singer and Friedlander went into administration last year, and have been lobbying Government for compensation ever since.

The committee report states: “We believe that it is imperative that charities have access to the funds that were provided to them by the public.”

Naomi House, which provides support and respite care for children with life-limiting illnesses and their families, is one of 30 charities in the Save Our Savings (SOS) group, which has about £50m at risk in the failed bank.

Professor Khalid Aziz, chairman of Naomi House, said: “I’m delighted. It’s a vindication of all the lobbying we have done over the last six months, and we’d like to think it’s a significant step forward.

“Of course, the Government doesn’t have to take any notice of this committee, but they would have to be incredibly hard-hearted not to pick up on what is clear advice.

“The Government has two months to respond, but we hope they will do so sooner than that.”

Prof Aziz said that securing the funds would enable the hospice to restart its hospice at home service and allow them to use all six beds at its new teenage facility Jack’s Place – currently under construction – instead of just three, which is all it could manage with the current cashflow.