Libor scandal: Downing Street rejects George Osborne apology calls

How the Balls v Osborne row unfolded

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Chancellor George Osborne has no need to apologise to Ed Balls for suggesting he was involved in fiddling interbank lending rates, Downing Street has said.

The prime minister's spokesman said it was a "political row" and Mr Osborne was right not to back down.

Mr Balls has demanded an apology after Mr Osborne said he had "questions to answer" and Labour ministers were "clearly involved" in pressuring banks.

Some senior Tories have said Mr Osborne may have overstepped the mark.

Speaking on the BBC's Daily Politics, former chancellor Lord Lamont said Mr Osborne had "overplayed his hand" and said he had not liked the atmosphere when the issue was debated in the Commons.

"If there is an allegation Ed Balls intervened it doesn't stand up - that is clear," he added.

But Foreign Secretary William Hague earlier defended his cabinet colleague, telling BBC Radio 4's Today programme: "There remains questions to answer and I see no reason why he should apologise."

And Downing Street said Prime Minister David Cameron also backed Mr Osborne's position, but added: "This is a political issue.

"There is a lot of political debate about what happened in the banking industry in the recent past. One issue is the regulatory system and the feeling that the regulatory system in place was not effective. That is clearly a matter for political debate".

'Personal accusations'

Mr Osborne made the allegation about his Labour shadow Mr Balls last week in an interview last week with The Spectator magazine.

He said "people around Gordon Brown" while he was prime minister had "questions to answer" over allegations from Barclays that "senior Whitehall figures" had put pressure on them to post artificially low Libor rates.

Norman Lamont: 'If there is an allegation Ed Balls intervened it doesn't stand up - that is clear'

"My opposite number was the City minister for part of this period and Gordon Brown's right hand man for all of it. So he has questions to answer as well. That's Ed Balls, by the way," he added.

He was confronted by Mr Balls during a Commons debate, who called on him to withdraw the "false, personal accusations", describing them as "cheap, partisan and desperate".

Mr Osborne stood his ground and urged his Labour shadow to "explain what Labour's involvement was, who were the ministers, who had the conversation, who were the senior figures".

Senior Tory MP Andrea Leadsom added her voice on Monday to Labour calls for Mr Osborne to correct the record.

When asked on BBC Radio 4's World Tonight programme whether Mr Osborne should apologise, Mrs Leadsom said: "Yes I do. I mean I think obviously he made a mistake and I think he should apologise."

'Decisive action'

The Conservative MP went on: "I think it was a very valid discussion at the time about who knew what and it has now been completely squashed by Paul Tucker."

The Treasury select committee member said "at a personal level", the chancellor "probably would want to apologise", although she added that was a matter for Mr Osborne.

On the BBC News Channel on Tuesday Mrs Leadsom clarified her comments, saying she had been talking about "a very specific point" and said "Ed Balls still has a huge amount to answer for about his time in office during the last parliament when the tri-partite regime absolutely failed us and allowed the banks to get into this mess".

On Monday, Bank of England deputy governor Paul Tucker was asked by the Treasury Select Committee whether any government official or minister in 2008 had asked him "to lean on" Barclays or any other bank to lower their Libor submissions.

Paul Tucker said no government minister had asked him to "lean on" Barclays over Libor

Specifically, he was asked about Shriti Vadera, an adviser to then-Prime Minister Gordon Brown, shadow chancellor Ed Balls, who was then a Labour minister, and the then Downing Street chief of staff Sir Jeremy Heywood.

Rejecting claims that any of them had asked him to pressure Barclays to lower its Libor submissions, his response each time was "absolutely not".

He also told the MPs he did not instruct Barclays to lower its Libor submissions in 2008 and that ex-Barclays boss Bob Diamond's account of a conversation between them gave "the wrong impression".

Mr Tucker said that Mr Diamond's resignation from Barclays last week was the right decision because "absolutely decisive action was needed to start a new chapter".

Barclays chairman Marcus Agius is set to give evidence to the Treasury Select Committee on Tuesday.

He is expected to be asked about fines issued against the bank and Mr Diamond's resignation.

Emails released on Monday revealed that the BoE had almost daily contact with Barclays over inter-bank lending at the end of October 2008.

At this time, during the height of the financial crisis, Barclays was trying to manipulate Libor rates by submitting lower borrowing rates.

These rates, submitted by a number of banks, go into calculating the daily Libor, or London inter-bank lending rate, which is the basis for millions of daily financial transactions.

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