George Osborne's controversial assertion that Labour ministers were "clearly involved" in manipulating interest rates during the financial crisis appeared to be unravelling last night after the claim was disputed by the Bank of England.
Giving evidence to Parliament Paul Tucker, the Deputy Governor, denied that any minister, advisor or official had tried to "lean on" him in 2008 over Libor rates.
He also rejected suggestions that he had put pressure on Barclays to lower their interest rates in a conversation with the bank's then chief executive, Bob Diamond.
He said an email note of a conversation written by Mr Diamond had given the "wrong impression" and that the concerns he was flagging up was that Barclays itself was reporting inaccurate rates.
"It was not remotely in my mind during this conversation that I could be misinterpreted," he said. "It (the email) should have said: are you ensuring that your senior management are following the day-to-day operations of your money desk [that sets Libor]? Are you ensuring that they are not marching you over the cliff inadvertently?"
Mr Tucker's intervention will delight Labour and in particular Ed Balls, the target of Mr Osborne's original claim. Last night Mr Balls said it proved Mr Osborne's allegations were "totally false".
Mr Tucker said the first he knew about accusations about the widespread fixing of the Libor rate was a few weeks ago when the Financial Services Authority report was published. "I was not aware of allegations of low-balling until the last few weeks," he said.
Mr Tucker said he would describe the setting of the Libor rate as "a cesspit" and called for an end to the practice of "self-certification" under which banks submit figures on the basis of their own judgments rather than actual transactions.
And in a strong suggestion that he believed other key banking indicators could also have been fixed, he said the review of the operation of Libor being undertaken by the FSA's Martin Wheatley should look at all indices which rely on self-certification.
Mr Tucker was repeatedly pressed on his assertion that he did not know, or have suspicions, that the Libor rate was being fixed. The committee drew his attention to the minutes of a meeting that he chaired which stated that some officials "thought that Libor fixings had been lower than actual traded interbank rates through the period of stress".
Mr Tucker said this reflected a concern that banks were not borrowing and were trying to reflect what they might be able to borrow at, rather than the real rates.
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