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Labour warning on Co-op inquiry Co-op Bank crisis: David Davis says ministers should have seen it coming
(about 3 hours later)
Labour has asked the UK's top civil servant to guarantee a probe into the Co-op Bank will not become a "Trojan horse for a party political attack". Senior backbench Conservative MP David Davis has described the problems at the Co-op Bank as a "spectacular failure" that "should have been seen coming".
Tory ministers have said the investigation into how Paul Flowers came to be put in charge of the Co-op Bank will be fully independent. In an interview with BBC Radio 4's World at One, he said the Financial Services Authority had warned about the bank's problems in April 2012.
But they say Labour has questions to answer about its links to Mr Flowers. The Treasury and the Bank of England should therefore have been aware them too, Mr Davis said.
The former bank boss has been arrested in connection with a "drugs supply investigation". Ministers have announced an independent inquiry into events at the bank.
But Mr Davis said problems were "visible as far back as 2011" and had been "plain for a very long time".
"Obviously we've had the near destruction of the foremost mutual bank in Britain, but in addition £1.6bn of Lloyds Bank money, much of which is taxpayers' money, was wasted on it," he added.
Earlier, Mr Davis had also told the Financial Times that the chancellor and the Treasury had "serious questions to answer" about their oversight of the Co-op Bank.
The Treasury has confirmed that Mr Osborne had used powers handed to him by the Financial Services Act 2012 to order an independent investigation into "events at the Co-op Bank and the circumstances surrounding them".
This will look back to 2008 and include the conduct and appointment of directors.
The bank's former boss, Paul Flowers, has been arrested in connection with a "drugs supply investigation".
Mr Flowers, 63, was filmed allegedly handing over £300 for cocaine and discussing buying other illegal drugs.Mr Flowers, 63, was filmed allegedly handing over £300 for cocaine and discussing buying other illegal drugs.
Following the revelations he was suspended from both the Methodist Church, where he was a minister in Bradford, and the Labour Party.Following the revelations he was suspended from both the Methodist Church, where he was a minister in Bradford, and the Labour Party.
'Shocked' 'Trojan horse'
Prime Minister David Cameron has suggested the Labour Party knew of concerns about Mr Flowers, a former Labour councillor and business adviser to Labour leader Ed Miliband, but did not act on them.Prime Minister David Cameron has suggested the Labour Party knew of concerns about Mr Flowers, a former Labour councillor and business adviser to Labour leader Ed Miliband, but did not act on them.
He has also highlighted the millions of pounds in "soft loans" and donations made by the Co-op to the Labour Party.He has also highlighted the millions of pounds in "soft loans" and donations made by the Co-op to the Labour Party.
Mr Miliband said he was confident Labour had acted with "complete integrity" and accused Mr Cameron of "unjustified smears". But Mr Miliband said he was confident Labour had acted with "complete integrity" and accused Mr Cameron of "unjustified smears".
Details are expected in the next few days of an inquiry ordered by Mr Cameron into why Mr Flowers was considered to be a suitable chairman for the Co-op Bank. In a letter to Cabinet Secretary Jeremy Heywood, Labour's shadow cabinet office minister Michael Dugher said "all in the Labour Party have been shocked at recent events".
But Labour is attempting to put pressure on Cabinet Secretary Jeremy Heywood to ensure political neutrality. "We fully back an independent inquiry to ensure such events cannot be repeated," he continued.
In a letter to Mr Heywood, shadow cabinet office minister Michael Dugher says "all in the Labour Party have been shocked at recent events".
"We fully back an independent inquiry to ensure such events cannot be repeated.
"We believe, however, that as cabinet secretary it is your responsibility to ensure that any such inquiry must be genuinely independent and robust."We believe, however, that as cabinet secretary it is your responsibility to ensure that any such inquiry must be genuinely independent and robust.
"It must not become some sort of Trojan horse for a party political attack."It must not become some sort of Trojan horse for a party political attack.
"We would therefore be grateful if you could provide a public and written assurance that this will be the case.""We would therefore be grateful if you could provide a public and written assurance that this will be the case."
'Leadership questions' Asked to respond to Mr Davis's comments, the prime minister's official spokesman told a Westminster media briefing: "I think what Co-op bondholders and clients want to to know is why the Co-op got into the financial difficulties it is in, including the questions about its leadership."
It comes as senior Conservative MP David Davis said Chancellor George Osborne and the Treasury had "serious questions to answer" about the oversight of the Co-op Bank.
"There are really serious questions to answer about what they were all doing," Mr Davis told the Financial Times.
Issues over the bank's operations were raised by a rival at the time of a subsequently-aborted takeover bid of Lloyds Bank branches.
"These problems were apparent to a rival and would have been - with a bit of work - to anyone else," said Mr Davis, who fought David Cameron for the Conservative leadership in 2005.
Asked to respond to Mr Davis's comments, the prime minister's official spokesman told a Westminster media briefing: "I think what Co-op bondholders and clients want to to know is why the Co-op got into the financial difficulties it is in, including the questions about its leadership.
"That's why the chancellor is in discussion with the regulators around the appropriate form of inquiry."
Labour seized on the comments, praising Mr Davis's intervention and adding that the inquiry must "get to the bottom of" what went wrong at the bank on the government's watch.Labour seized on the comments, praising Mr Davis's intervention and adding that the inquiry must "get to the bottom of" what went wrong at the bank on the government's watch.
The prime minister's official spokesman insisted scrutiny would be on why the Co-op got into financial difficulty, "including questions about its leadership".