Fraud Office opens Libor investigation

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All smiles now? Osborne retracts accusations against Balls.
All smiles now? Osborne retracts accusaations against Balls.

The likelihood of criminal charges over the Libor scandal increased dramatically today when the Serious Fraud Office (SFO) opened an investigation.

In a brief statement, the group said: "The SFO director David Green QC has today decided formally to accept the Libor matter for investigation".

A criminal investigation could delay the parliamentary inquiry into the scandal which was agreed yesterday.

Speaking in the Commons, attorney general Dominic Grieve said pursing criminal charges could push back an investigation, although the joint-committee is likely to push ahead on the basis of continued legal advice.


The news came amid a temporary ceasefire between George Osborne and Ed Balls, after the chancellor admitted his counterpart was not directly involved in the Libor scandal.

The admission came just hours after Balls had challenged Osborne to apologise to him in the Commons, saying: "If he has any evidence he must produce it now.

"If he will not provide the evidence now he needs to stand at this despatch box now and withdraw this accusation."

The chancellor refused too back down in the Commons but hours after the debate his aides told sources at the BBC that Balls had not directly intervened in the affair.

Barclays claims that Bank of England deputy governor Paul Tucker called Bob Diamond in October 2008, suggesting the bank reduce its Libor rating due to concerns from "Treasury ministers".

Osborne used the statement to launch an unprecedented attack on Balls in the Spectator magazine, saying the Treasury minister in question may well have been Balls.

"My opposite number was the City minister for part of this period and Gordon Brown's right hand man for all of it," he said.

"So he has questions to answer as well. That's Ed Balls, by the way."

The chancellor's decision to personally involve Balls made cross-party consensus even harder to achieve than it was before, hijacking his own attempt to force through a joint-parliamentary inquiry under Andrew Tyrie, chairman of the Treasury committee.

Labour tried to impose an independent judge-led inquiry in the vein of Leveson last night but it later accepted the will of the Commons and backed the government proposal.

"The prime minister and the chancellor have made a very grave error of judgement," Balls told MPs after the vote.

"And any time any future scandals emerge, people will ask why are we not having the full independent inquiry that this country needs?"

Analysts viewed yesterday's fireworks between Balls and Osborne as a warm up for the 2015 general election, when the Tories will again focus on accusations of Labour's responsibility for the financial crisis.

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