Labour scorn allegations on Libor
Published 07/07/2012 | 14:32
The row over political involvement in the Libor rate-fixing scandal has been reignited with Labour claiming newly published evidence showed allegations by George Osborne were unfounded.
A paper prepared by UBS for the Treasury in 2008, published by the Financial Times, suggested only "legitimate policy improvements" to improve the operation of a credit guarantee policy, the Opposition said.
And identical concerns about the effects on the inter-bank lending rate of the £250 billion scheme were even raised soon afterwards by the Conservative Opposition, they pointed out.
Mr Osborne cited the report during angry Commons clashes on Thursday after he said former prime minister Gordon Brown's inner circle had "questions to answer" over apparent pressure on Barclays to post lower rates. "They were clearly involved and we just haven't heard the full facts, I don't think, of who knew what when," he told the Spectator magazine ahead of the debate
It came after ex-Barclays boss Bob Diamond revealed he had been warned by Bank of England deputy governor Paul Tucker in October 2008 in a phone call about concerns among senior Whitehall figures about the bank's high rates.
Baroness Shriti Vadera, a former UBS employee made a minister by Mr Brown, has said she commented on the note "to focus the issues on the lending conditions in the real economy for real people". But she strongly denies speaking to Mr Tucker - who will give evidence about the call to the Treasury select committee on Monday - about Libor rates or making any inappropriate suggestions.
The November 1 note titled Reducing Libor, Improving Lending Conditions suggested the rate would "fall significantly quicker" if the credit scheme could be made to work better, suggesting a cut in fees. On November 10, Philip Hammond - then number two in Mr Osborne's shadow treasury team - told MPs that if the credit guarantee scheme had worked properly "Libor rates would have fallen by 1.5% last Friday".
Calling for a public apology from the Chancellor, shadow financial secretary Chris Leslie said: "Everybody can now read for themselves the advice to the Treasury from UBS bank in 2008 which the Government has this week insinuated is about the deliberate manipulation of the Libor rate.
"In fact, the note simply proposes legitimate policy improvements to the Government's credit guarantee scheme in order to reduce inter-bank lending costs during the credit crunch. This was at a time when ... Philip Hammond was complaining that Libor had not fallen sufficiently as a result of that very credit guarantee scheme. There is absolutely nothing in this note about the deliberate fixing of the Libor rate, which Barclays traders were involved in.
"George Osborne did not have a shred of evidence for the false allegations he threw around this week and which his aides have now withdrawn. It's time the Chancellor had the integrity to do so himself publicly and started getting on with the day job of getting Britain out of his double-dip recession."