Shadow chancellor Ed Balls is keeping up the pressure on George Osborne to retreat after last Thursday's "disappointing" Commons debate.
Balls told BBC1's The Andrew Marr Show that while Osborne's aides had retracted the chancellor's claim that Balls had been personally involved in the Libor scandal, the man himself had not retreated.
He claimed the personal focus on Balls' integrity was a "political smokescreen" designed to draw attention away from the opposition's calls for a judge-led inquiry into the banking sector.
"The chancellor knowingly said things in the public debate which he knew to be untrue and he did so for political reasons," Balls said.
"His aides have withdrawn these comments, but he himself would not withdraw those comments in the House of Commons, even though he knew they were categorically untrue."
Conservative attacks on Labour's record in government have centred on Balls' alleged role in manipulations of the interbank lending rate between 2005 and 2007.
Osborne failed to provide evidence proving these claims at the despatch box on Thursday, despite being repeatedly challenged to do so by Balls.
On the tone of the debate, which Balls described as "intense and angry", he added: "I don't think it's ever good for people to see that in parliament."
The shadow chancellor defended his record in government, claiming that at the time it was Labour which was under attack for being too tough in its regulation of the City.
"The context of the time was to be heavier was to undermine City competitiveness," he said.
The Serious Fraud Office opened an investigation into the interbank lending rate scandal on Friday, meaning the parliamentary inquiry now set to take place into professional standards in the banking sector could be delayed.
It had initially been thought that manipulations of the lending rate would not lead to criminal prosecutions via the Financial Standards Authority watchdog.
That was incorrect, Balls said this morning. He said the Fraud Act 2006 applied and criticised the SFO for its "very, very tardy" response to the scandal.