George Osborne ratcheted up political tensions ahead of today's Commons showdown over the Barclays scandal as he accused members of the last Labour government of being "clearly involved" in rate fixing.
In the strongest attempt by a minister to implicate the previous administration over the manipulation of the Libor rate, the Chancellor said there were "questions to be asked" of the "people around Gordon Brown".
His attack – in which he singled out Ed Balls, the Shadow Chancellor – sets the scene for acrimonious parliamentary clashes today over what form the investigation into the future of banking should take.
Labour is pressing for a two-part, judge-led inquiry, while the Coalition wants to hand responsibility to an all-party committee of MPs and peers. The Government looks certain to win the vote – and will then challenge the opposition to respect the will of Parliament and co-operate with the committee.
The temperature surrounding the debate will be raised by Mr Osborne's comments in today's edition of The Spectator. Referring to efforts to keep Libor low during the financial crisis of 2008, he said: "As for the role of the Labour government and the people around Gordon Brown – well, I think there are questions to be asked of them." He said: "They were clearly involved and we just haven't heard the full facts, I don't think, of who knew what when."
Mr Osborne added: "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."
Last night, Chris Leslie, a shadow Treasury minister, retorted: "This is desperate stuff from George Osborne – lashing out in a frenzied way that demeans the office of the Chancellor of the Exchequer. It's now increasingly clear the isn't interested in getting to the truth, only in playing party politics and throwing around false allegations with no evidence."
The Tories have sought to link senior Labour figures, including Mr Brown, Mr Balls and the former Treasury minister, Baroness Vadera, to claims that "senior Whitehall figures" pressed Barclays to report lower lending rates. Their concerns were allegedly relayed to Barclays by Paul Tucker, the Bank of England's deputy governor.
Bob Diamond, the former Barclays chief executive, told MPs on the Treasury Select Committee yesterday that he did not want to speculate about to whom Mr Tucker had spoken.
The Government has nominated the Conservative MP Andrew Tyrie to head the joint committee into the Libor scandal. But doubts are growing over whether he will accept the nomination, which would leave the Government looking for a replacement. Labour's proposal is for a judicial inquiry into the "culture and professional standards of the banking industry".
Banking inquiry: Who'll be the boss?
If Mr Tyrie drops out as chairman of the planned joint committee, the Government could turn to:
Lord O'Donnell Stood down this year as Cabinet Secretary. He was Permanent Secretary to the Treasury for three years.
Lord MacGregor Was Chief Secretary to the Treasury in the Thatcher government. He worked for a merchant bank before serving as an MP between 1974 and 2001.
Lord Turnbull Was Cabinet Secretary under Tony Blair. Before that he was Treasury Permanent Secretary when Gordon Brown was Chancellor.
Peter Lilley The Tory MP for Hitchin and Harpenden. He served as a Treasury minister for three years, followed by a seven-year spell in the Thatcher and Major Cabinets.Reuse content