Magazine article The Spectator

Chancellor on the Chare

Magazine article The Spectator

Chancellor on the Chare

Article excerpt

The Libor scandal has energised George Osorne - and he's going for Labour's jugular

Walk i n t o G e o r g e Osborne's suite of offices in the Treasury and you are struck straightaway by a new excited mood. People who a month ago looked worn down by the burdens of office are now full of life.

In no one has the transformation been more dramatic than the Chancellor himself. He strides out of his room, shoulders back, a smile playing across his face, and says, 'Come on, stop gossiping with the political advisers. Let's get on with it.'

It is remarkable to think that just a few weeks ago colleagues were discussing whether his enthusiasm had been permanently dented by events.

This new enthusiasm is the result of the Libor scandal. For many chancellors, a City scam coming on top of the eurozone crisis and a stagnant economy would be just another cross to bear. But office has not dulled Osborne's political instincts. He saw almost instantly that a story that started with 14 big boys at Barclays trying to make a profit by hook or by crook could fast turn into something that threatens to destroy reputations in Westminster as well as the City.

For this Libor scam is not only about spivs in trading rooms but also about what the powers that be did to keep the average lending rate so low during the worst days of the financial crisis.

To Osborne, for whom the political and the economic come together, the course was clear. Deal with the regulatory impact of the scandal and then exonerate the Bank of England, which Barclays was trying to implicate, and point the finger of blame at the last Labour government, which was in power when these abuses took place.

Osborne, who prides himself on having put the Bank of England in charge of financial regulation, is keen to defend the Old Lady of Threadneedle Street's honour against Bob Diamond's accusation that she urged Barclays to get its Libor down. Leaning forward in his government-issue red ministerial armchair, he stresses that this charge has been 'specifically addressed, not just by our own investigators at the Financial Services Authority but also in the US Department of Justice. And they are not people who will pull their punches, and they're very clear that the Bank did not issue instructions to Barclays to cut its Libor rate.'

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.'

This last line is delivered straight into the microphone - a classic Osborne twist of the knife. He knows that this scandal presents a chance to destroy Balls's reputation, to remind everyone of his role in the failures of the Labour government.

One wonders if it is also intended to bring into question Balls's defence that he couldn't have known about any rate-fixing as he was Secretary of State for Children at the time. …

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