Labour rejects George Osborne’s Libor claim

A paper prepared by UBS for the Treasury in 2008, published in a weekend newspaper, 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.

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 said.

It came after former Barclays boss Bob Diamond  revealed he had been warned by Bank of England deputy governor Paul Tucker in 2008 in a phone call about concerns among Whitehall figures about the bank’s high rates.

Baroness Shriti Vadera, a former UBS employee, made a minister by 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 Tucker about  Libor rates or making any  inappropriate suggestions.

The 1 November note suggested the rate would “fall significantly quicker” if the credit scheme could be made to work better, suggesting a cut in fees.

On 10 November, Philip Hammond, No 2 in Osborne’s shadow treasury team, told MPs if the credit guarantee scheme had worked properly “Libor rates would have fallen by 1.5 per cent 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.”