Top Tory 'backed Labour on Libor'

Jane Merrick and Kunal Dutta report on the fierce banking row

The row between Labour and the Conservatives over the interest rate-fixing scandal escalated yesterday as it emerged that a cabinet ally of George Osborne argued that a lowering of the Libor rate during the 2008 banking crisis was "where we need to get to".

Philip Hammond, the Defence Secretary, who is close to the Chancellor, told Parliament in November 2008 that the "desired effect" of the Labour government's policies on encouraging lending would have been a 1.5 per cent fall in the London Inter-Bank Offered Rate.

Labour said yesterday that the intervention by Mr Hammond, then shadow chief secretary to the Treasury, showed that there was no manipulation of Libor by Labour ministers or officials in Whitehall at the time, but that it was a legitimate policy concern of both government and the Tory opposition – something quite different to the illegal fixing undertaken by Barclays traders.

In a further blow to the Chancellor's main line of attack against Labour, a note written for the Treasury on bank borrowing costs by UBS bankers, entitled "Reducing Libor, improving lending conditions", was published showing proposals that there should be legitimate changes to government policy in order to reduce Libor.

On Thursday, in the Commons, Mr Osborne suggested in angry clashes with his opposite number, Ed Balls, that Gordon Brown's City adviser, Baroness Vadera, had questions to answer as she had a role in the UBS note.

However, the full publication of the memo makes clear that Lady Vadera was acting legitimately because it details an above-board strategy to make lending conditions more favourable to businesses. Labour sources said Mr Osborne needed to make a full public apology to Mr Balls and Lady Vadera, preferably in the Commons. The Chancellor's aides have so far withdrawn on his behalf only an accusation made in The Spectator that Mr Balls and other figures close to Mr Brown were "clearly involved" in trying to manipulate interest rates.

Paul Tucker, the Bank of England's deputy governor, will appear before the Treasury Select Committee tomorrow to explain his version of a conversation he had on October 29 2008 with Bob Diamond, then a senior executive at Barclays. Mr Diamond claims that Mr Tucker was told "senior Whitehall figures" were putting pressure on Barclays to lower their submissions to Libor.

This week Andrew Tyrie, the Conservative chairman of the Treasury Select Committee, is expected to publish details of other members of a parliamentary inquiry into the Libor scandal. It is expected that the Labour peer Lord McFall, a former member of the select committee, will join the inquiry and may even act as a joint chairman, to assuage concerns that the investigation will be party political.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
News
Sarah Silverman (middle) with sister Reform Rabbi Susan Silverman (right) and sister actress Laura Silverman (left) at Jerusalem's Western Wall for feminist Hanuka candle-lighting ceremony
peopleControversial comedian stages pro-equality Hanukkah lighting during a protest at Jerusalem's Wailing Wall
Arts and Entertainment
The Bach Choir has been crowned the inaugural winner of Sky Arts’ show The Great Culture Quiz
arts + ents140-year-old choir declared winner of Sky Arts' 'The Great Culture Quiz'
Life and Style
food + drink
News
i100
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Finance Director

£65000 - £80000 per annum: Recruitment Genius: Finance Director required to jo...

Recruitment Genius: Medico-Legal Assistant

£15000 - £25000 per annum: Recruitment Genius: This is a unique opportunity fo...

Ashdown Group: (PHP / Python) - Global Media firm

£50000 per annum + 26 days holiday,pension: Ashdown Group: A highly successful...

The Jenrick Group: Quality Inspector

£27000 per annum + pension + holidays: The Jenrick Group: A Quality Technician...

Day In a Page

Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Could cannabis oil reverse the effects of cancer?

Could cannabis oil reverse effects of cancer?

As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

The Interview movie review

You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
Serial mania has propelled podcasts into the cultural mainstream

How podcasts became mainstream

People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
Jesus Christ has become an unlikely pin-up for hipster marketing companies

Jesus Christ has become an unlikely pin-up

Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
Rosetta space mission voted most important scientific breakthrough of 2014

A memorable year for science – if not for mice

The most important scientific breakthroughs of 2014
Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

Christmas cocktails to make you merry

Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
5 best activity trackers

Fitness technology: 5 best activity trackers

Up the ante in your regimen and change the habits of a lifetime with this wearable tech
Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

Paul Scholes column

It's a little-known fact, but I have played one of the seven dwarves
Fifa's travelling circus once again steals limelight from real stars

Fifa's travelling circus once again steals limelight from real stars

Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
Frank Warren column: 2014 – boxing is back and winning new fans

Frank Warren: Boxing is back and winning new fans

2014 proves it's now one of sport's biggest hitters again
Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas