Paul Flowers puts blame on ministers for Co-op crisis

Disgraced former chairman speaks out as Government sells £4bn Lloyds stake
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The Independent Online

Disgraced former Co-op Bank chairman Paul Flowers last night claimed interference from Government ministers contributed to the problems which left the business in the worst crisis in its history.

The former Methodist minister made the allegation in an interview with the BBC's Newsnight as the Treasury confirmed it was selling off a 7.5 per cent stake in Lloyds Banking Group for around £4bn, taking the taxpayer's stake down to just over 25 per cent.

Mr Flowers claimed ministers had exerted pressure on him and the bank to go ahead with the failed attempt to buy more than 600 Lloyds branches, a business then known as Verde.

"They wanted the deal," he said.

Mr Flowers alleged he had received calls from then junior Treasury minister Mark Hoban "two or three times a week".

"He was the junior minister, I know," he said. "This originated from much higher up."

That would appear to point the finger at Chancellor George Osborne, but Mr Flowers's claims are at odds with what he said in his now infamous appearance before the Treasury Committee last year.

In that hearing he said while there had been regular conversations with ministers, "I would not say (it was) pressure. It was mainly a sense of political goodwill behind the process". He later said: "There was no interference in process and there was no undue pressure."

The Co-op Verde deal ultimately collapsed and Lloyds now plans to float off the business as TSB. It has to be offloaded to satisfy EU competition watchdogs. Meanwhile, a £1.5bn hole was found in Co-op's accounts forcing it to sell up to bondholders, largely hedge funds.

Mr Flowers said while he believed the bank had failed its customers, many of the revelations surrounding his private life "happened after I had left".

He was arrested last year as part of a police investigation into claims that he bought drugs. The claims were first made in the Mail on Sunday newspaper. A series of lurid allegations about his private life followed.

A Treasury spokesman denied Mr Flowers's allegations of interference: "The selection of the Co-op and the decision on whether to proceed with the Verde deal was a purely commercial matter for Lloyds Bank and the Co-op Bank, as the chairman and chief executive of Lloyds have consistently made clear. In the event, Co-op withdrew from the transaction."

The latest sale of Lloyds shares is expected to come in ahead of the 73.6p at which the last Government bought into Lloyds. The shares were at 79.11p by the close of trading on Tuesday, despite a poor second half for Lloyds.