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Osborne and Balls are playing high stakes on Libor

5 July 2012

4:30 PM

5 July 2012

4:30 PM

The exchanges between Balls and Osborne just now are some of the most heated and most personal in parliamentary memory. I suspect that Balls would now not offer to cook Osborne ‘my 14-hour pulled pork South Carolina barbecue. I’d know he, as an American aficionado, would truly appreciate it’.

The cause for this row is George Osborne’s interview in the new issue of The Spectator. The following paragraphs have sent Balls into a rage:

‘If exonerating the Bank is his first priority, his second is tying this scandal to the last government. He starts by blaming the regulatory system devised by Brown and Balls for allowing these abuses to happen. But suddenly, and far more explosively, he moves on to the political efforts to keep Libor low during the financial crisis of 2008. ‘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 says. He starts to discuss reports that those in the Brown circle were pressuring Barclays to manipulate the Libor rate it was paying. Then he drops a bombshell: ‘They were clearly involved and we just haven’t heard the full facts, I don’t think, of who knew what when.’

For Osborne to declare that those around Brown were involved in the efforts to keep Libor down is a remarkable charge, one sure to pour petrol on the political fire raging after it was revealed that ‘senior Whitehall sources’ were behind the pressure on Barclays over Libor. But Osborne doesn’t stop there.

He continues, ‘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.’

Now, it’s worth noting that Osborne didn’t say it was Ed Balls who was ‘clearly involved’. But that Balls ‘has questions to answer as well’. The remark, though, was undoubtedly intended to put the focus on Balls.

Both Osborne and Balls are playing high stakes here. If this debate ends up reminding everyone about Labour’s role in the financial crisis and its failed regulatory system—devised by Brown and Balls, then it will play out to the Tories’ advantage. But if Labour manages to persuade the public that the Tories are blocking a proper inquiry because they’re too close to the City, then it will be advantage Labour. As Matt d’Ancona has said, this all matters so much because there won’t be an economic resolution by the next election.

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