BRITAIN has welcomed a breakthrough in the £2.3 billion dispute with the Icelandic Government over the collapsed IceSave bank.

Reykjavik announced a new draft deal on repaying the cash spent by the Government on compensating tens of thousands of UK savers after the 2008 collapse.

Under the terms of the proposal—which most be approved by Iceland's parliament and signed off by the UK and the Netherlands, which is also owed money—repayments must start by 2016, at an interest rate of 3.3 per cent, and be completed by 2046.