Chancellor of the Exchequer George Osborne accused the Labour Party of taking money and soft loans from Co-Operative Bank Plc, elevating a dispute over the opposition’s links with the institution now under investigation.
Osborne ordered an independent inquiry into events at Co-Op Bank after its parent ceded control and former chairman, Paul Flowers, was arrested after he was filmed buying crack cocaine by a U.K. newspaper. Co-operative Party candidates stand jointly with Labour in some constituences.
Co-Operative Group Ltd. relinquished control of its lending arm to bondholders last month to help plug a 1.5 billion-pound ($2.4 billion) capital shortfall exposed by its failed bid for branches owned by Lloyds Banking Group Plc. Chairman Len Wardle resigned last week after leading the board that appointed Flowers.
“At least parts of the Labour Party knew things about Mr. Flowers that they did not pass on to the regulator,” Osborne told BBC Radio. Labour is “currently taking money and soft loans from the Co-Op at the very moment while this institution is in trouble, where bondholders are having to make sacrifices, pensioners who rely on the income from those bonds are having to make sacrifices, where people working for the Co-Op face losing their job.”
The Daily Telegraph reported today that Labour’s property portfolio has profited from low-interest loans from the bank. Labour Party Properties Ltd. secured a loan of 3.8 million pounds at a rate of 2.88 percent, the paper said.
“The interest rate of the Labour Party’s loan with the Co-Op is 3.5 percent above the Co-Op’s base,” Labour said in an e-mailed statement. “To describe it as a ‘soft loan’ is untrue and is a smear being peddled around by the Conservative Party.”
Labour’s home affairs spokesman, Yvette Cooper, said the Tory allegations amount to “a real deterioration in the nature of the politics,” accusing Prime Minister David Cameron of presiding over “a return to the nasty party.”
Osborne also defended his government’s involvement in plans for Co-Op Bank to take over more than 600 Lloyds branches.
“Here the system worked because, actually, when we saw the Co-Op was in no fit state to take over the Lloyds branches, the alarm bell rang, the alarm bell was heard and that is why our system is working,” he said.