Osborne urged to apologise to Balls

George OsborneA Conservative MP has urged Chancellor George Osborne to apologise to rival Ed Balls for saying he had "questions to answer" over the Barclays rate-fixing scandal.

Andrea Leadsom made the plea after the deputy governor of the Bank of England "absolutely" rejected suggestions he had leant on the bank to manipulate the Libor or that Labour ministers had encouraged him to do so.

Ms Leadsom, who sits on the Treasury Select Committee, said fellow Tory Mr Osborne had made a mistake last week by claiming that figures in Gordon Brown's inner circle were involved in pressurising Barclays into altering the key lending rate.

The MP said: "Obviously he made a mistake and I think he should apologise. I think it was a very valid discussion at the time about who knew what and it has now been completely squashed by Paul Tucker."

Mr Tucker, who is a frontrunner for the role of Governor when Sir Mervyn King steps down, told MPs on Monday that a record of a contentious phonecall he had with former Barclays boss Bob Diamond about Libor gave the "wrong impression".

Appearing in front of the Treasury Select Committee, the senior banker said he had intended to ensure Barclays was not "inadvertently sending distress signals" about its financial health at a time when the market viewed the bank as the next in line for a government bailout.

The deputy governor rejected claims that the then Downing Street chief of staff Sir Jeremy Heywood, then City minister Ed Balls and former Treasury minister Baroness Vadera had asked him to pressure Barclays to lower its Libor submissions.

Labour seized on his comments as proof that Mr Osborne was wrong to make the claims, which first surfaced in the media before being repeated in the House of Commons, and demanded a public apology.

Labour Treasury spokesman Chris Leslie said: "This is now the final nail in the coffin of the Tory smear campaign the Chancellor led last week. It is now crystal clear that the allegations he threw around were completely wrong and without foundation."

Barclays chairman Marcus Agius will face the parliamentary committee later and is expected to be asked about fines issued against the bank and the resignation of Mr Diamond, who stepped down last week in the wake of the scandal.

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