Chancellor and his Labour opposite exchange angry accusations during debate over proposed investigations into bank culture
The chancellor, George Osborne, and his opposite number, Ed Balls, have been involved in angry exchanges as MPs debate proposals for an inquiry into the banking industry.
The pair clashed after Osborne accused the shadow chancellor of being involved in the scandal over the manipulation of the inter-bank lending rate (Libor). Balls denied any involvement and claimed Osborne’s “cheap and partisan” conduct demeaned the office he held.
MPs are to vote on whether to back Labour’s call for a full, judge-led independent inquiry into the banking culture, or support the government’s preferred option of a parliamentary inquiry.
In heated opening exchanges, with the deputy Commons speaker Nigel Evans battling to maintain order, Balls said Osborne’s actions illustrated the need for an independent investigation.
Challenged by Tory MP James Morris on his actions while in government, Balls said: “At no point, at any time when I was an adviser or a minister in the City, was any point put to me by the Financial Services Authority, the Treasury, the Bank of England or anyone in this house that there was any reason to doubt the integrity of the Libor market, which only came to light subsequently and has now been properly investigated.”
Tory MP Nadhim Zahawi asked him: “Can you confirm that in your time in office, no other minister, either in No 10 or the Treasury, spoke to the Bank of England on Libor that you know about?”
The shadow chancellor replied: “The reason why we advocate an open, public inquiry, judge-led, is to get precisely to the bottom of all these things.”
In an interview with the Spectator, Osborne said former prime minister Gordon Brown’s inner circle, including Balls, had “questions to answer” over apparent pressure on Barclays bank to post lower Libor rates during the credit crunch.
The bank’s former chief executive Bob Diamond told the Treasury select committee on Wednesday he could not shed any light on the identity of “senior Whitehall figures” who suggested the rates were too high.
Balls told Osborne: “The cheap and partisan and desperate way in which you and your aides have conducted yourselves in recent days does you no good, it demeans the office you hold and most important it makes it harder to achieve the lasting consensus we need.”
Balls called on the chancellor to withdraw the “false, personal accusations” which were made “purely in the hope of political advantage”.
Osborne told him that a report on Libor, commissioned by UBS, was seen by the former Labour minister Lady Vadera, and Diamond had said the senior Whitehall figures involved were ministers.
He called on Balls to “explain what Labour’s involvement was, who were the ministers, who had the conversation, who were the senior figures” and said he had to “answer for his time in office”.
Balls said Osborne’s allegation was “utterly false and untrue” and added: “The sight of a chancellor who says one thing to the press but can’t defend himself in parliament is embarrassing to the office.”
The chancellor again challenged Balls about the “ministers in Whitehall” who raised concerns with the Bank of England about Barclays’ high Libor rate: “Do you know who those ministers are?”
Balls did not answer the question but again denied his own involvement.
Labour’s motion calling for a judge-led review was backed by the Scottish National party, Democratic Unionist party, Plaid Cymru, Social Democrat and Labour party, Green MP Caroline Lucas and independent Sylvia Hermon.
Balls said: “The reality is we must all admit that regulation should have been tougher, including those who argued for less regulation.”
He said there was “massive public anger” following the disclosure of Barclays’ attempts to rig the benchmark Libor rate and the revelation that major banks were involved in mis-selling interest rate swaps to small firms.
“The sense of outrage comes on top of a deep and wide public discontent at the huge price our economy and economies around the world have paid as a result of the gross banking irresponsibility in the runup to the financial crisis,” he said.
“A price which is measured in billions of pounds of loans gone and debts written off, but is felt in the everyday lives of citizens in jobs lost, in small businesses gone bankrupt, in living standards undermined.”
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