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Charities which lost money in the Icelandic bank collapses should be bailed out by the taxpayer, the Commons Treasury committee has said.
In a report released on Saturday, the MPs also said that there is no need to make good the losses incurred by councils.
And UK citizens with deposits in the Isle of Man and Guernsey subsidiaries of the Icelandic banks also see their case for compensation rejected.
The committee said there was an "overarching principle that the UK government cannot cover deposits held in institutions outside its direct regulatory control".
For councils, the MPs said that it would be wrong to reward those which lost money by making good their deposits.
Ministers should, however, assist the charities which lost money in the bank collapses "on this occasion only".
Committee chairman John McFall said: "The committee came to the unanimous conclusion that it is only possible on this occasion to compensate charities and this is what we have recommended.
"The work undertaken by the charitable sector often provides the most vulnerable elements of society with invaluable support.
"At a time when more people than ever are faced with difficult economic circumstances, we believe that it is imperative that charities have access to the funds that were provided to them by the public."
The Labour MP added that the consequences of the Icelandic banks' failure "are clearly serious and distressing for all concerned".
"While we have much sympathy for the fate of all depositors, the committee unanimously agreed that UK taxpayers cannot be expected to cover deposits held in institutions outside the UK's direct regulatory control," he said.
"However, we are today strongly urging the UK authorities to work with those of the Isle of Man and Guernsey to resolve these issues."
He added that the inquiry had "raised many new questions about issues such as consumer advice and cross-border regulation of financial institutions".
Dods Parliamentary Communications Ltd