Bloomberg News

U.K. Tories Dismiss Labour Demand for Apology on Libor Remarks

July 10, 2012

U.K.'s Labour Party Ed Balls

Ed Balls, leader of the U.K.'s opposition Labour Party. Photographer: Chris Ratcliffe/Bloomberg

British Foreign Secretary William Hague dismissed a demand by the opposition Labour Party for an apology after Chancellor of the Exchequer George Osborne suggested it had been involved in the Libor rate-rigging scandal while in government.

“Parliament is a lively place and it should be, it’s a free parliament,” Hague told BBC Radio 4’s “Today” program. “The chancellor said there are questions to answer. There remain questions to answer and I see no reason why he should apologize for that.”

Labour’s top Treasury spokesman, Ed Balls, yesterday said testimony by Bank of England Deputy Governor Paul Tucker that he was in contact with officials rather than politicians over Libor rates in 2008 erased doubts about the previous government’s involvement.

“It is now absolutely clear that the chancellor’s allegations last week were totally false and completely without foundation,” Balls said in an e-mailed statement. “George Osborne should now publicly withdraw these false allegations and apologize.”

The dispute adds to the pressure on Osborne, who has come under attack since his March budget for a series of policy U- turns, and raises questions over his judgment by trying to use the Libor scandal to attack his opponents. With the economy mired in its second recession since the start of the financial crisis, Osborne is also facing ever louder calls to rethink his austerity plan, which Labour says is weighing on growth.

Osborne ‘Mistake’

Osborne told the Spectator magazine last week that people close to former Prime Minister Gordon Brown “were clearly involved” in the Libor affair and that Balls was one of those with questions to answer. The comments sparked angry exchanges between Balls and Osborne in the House of Commons.

Andrea Leadsom, a lawmaker from Osborne’s Conservative Party and a member of the committee that questioned Tucker yesterday, told BBC radio today that the chancellor had “made a mistake” and “should apologize.”

Tucker said no government minister or official pressured him to instruct Barclays Plc (BARC) or any other U.K. commercial bank to understate its Libor submissions during the financial crisis.

“Absolutely not,” Tucker told lawmakers, when asked if anybody from the civil service or the Labour government leaned on him. He said some of a memo written by former Barclays Chief Executive Officer Robert Diamond after an Oct. 29, 2008, phone call between the two on the issue gave “the wrong impression.”

Tucker, who was the central bank’s markets director at the time, said he spoke to Diamond as there were worries Barclays was “next in line” after Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc (LLOY) had accepted government bailouts in 2008.

Diamond Memo

According to the memo, Tucker had received calls from “senior” government figures on Barclays’ Libor pricing. Diamond said Tucker stated “that while he was certain we did not need advice, that it did not always need to be the case that we appeared as high as we have recently.”

Osborne seized on the memo last week and suggested Balls was one of the officials. Tucker said he was passing on concerns that had been expressed by government officials and that he had most contact during the crisis period with civil servants Jeremy Heywood, Tom Scholar, Jon Cunliffe and, to a lesser extent, Nicholas Macpherson, the top such official at the Treasury.

To contact the reporter on this story: Gonzalo Vina in London at gvina@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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