Attending a fund-raising dinner, the Shadow Chancellor boasted that he was the ‘Co-operative Shadow Chancellor’ who was ‘looking forward to taking co-operation into the Treasury when we get the chance’.
Mr Balls also said the bank would go from ‘strength to strength’ – even though disgraced chairman Paul Flowers had just been forced out for what it is now known to be major concerns about his expenses.
Ed Balls (left) speaks to Peter Marks at a reception at Downing Street for the launch of a Co-Op venture in 2010
The words further undermine Mr Balls’s attempts to distance himself from the Co-operative Bank scandal and from Flowers, who was arrested late on Thursday night after revelations that he bought crystal meth, crack cocaine and ketamine.
The senior Labour figure has received £50,000 in funding from the Co-operative movement and refuses to hand the money back, saying he was ‘proud’ to accept it. On Thursday, he said any attempts to link him to the scandal were ‘smears’.
But, as Flowers was bailed until the New Year after being quizzed by police over an ‘ongoing drug supply investigation’, it emerged:
- The disgraced Methodist minister claimed an extraordinary £63,000 in expenses in just three years as a Labour councillor in Bradford.
- Flowers sat on the national executive committee of the Co-op alongside three Labour MPs, two of whom – Chris Leslie and Cathy Jamieson – are members of Labour’s Treasury team.
- Chancellor George Osborne announced an independent probe into the near collapse of the Co-op Bank which will cover the ‘appointment’ of senior staff.
- Flowers’s solicitor said his client was in a ‘rather ponderous frame of mind’ and that police would be making ‘further inquiries’.
The former chairman of the Co-operative Bank, Paul Flowers
The praise he heaped on the struggling bank at the annual Co-op dinner on June 20 came despite the fact that just two weeks earlier, Flowers had been forced out after it emerged the Co-op bank had racked up a £1.5billion black hole of debt.
Mr Balls was forced to deny claims he was too close to the Co-op after Mr Flowers told MPs they had met at Labour Party functions. Both men attended a reception at No 10 in 2010 but Mr Balls says they did not have a conversation.
His denials were undermined when it emerged that he had bragged about his role in rubber-stamping legislation that paved the way for a disastrous takeover deal at the Co-op.
Mr Balls also accepted a £50,000 donation from the bank in March 2012, when Flowers was chairman. Labour has also benefited from millions of pounds in ‘soft’ loans with preferential rates of interest.
Earlier this week, Mr Balls insisted that he had not held meetings with Flowers, and said he had ‘never in my life’ had a conversation with him about the funding of his office.
But on June 20, the Shadow Chancellor hosted senior Co-op executives and guests from the Chinese Embassy at a private £70-per-head dinner in a luxury West-End hotel. Flowers had been on the guest list, but Labour sources said he did not attend.
Speaking about the Co-operative movement, Mr Balls said: ‘We are going from strength to strength. I am the first ever Co-Operative Shadow Chancellor. But, more importantly, I have a team of five in the House of Commons including me. Three are women; two are men.
‘Three are Co-operative and Labour MPs: a majority of co-operators in the shadow Treasury team, looking forward to taking co-operation into the Treasury when we get the chance.’
He also drew attention to the fact that four ‘fabulous’ by-election successes over the last year had seen four more Labour and Co-op MPs in Parliament.
‘People ask: “Does being a Labour and Co-operative MP help you get elected?” Well, what we are seeing in this Parliament is they are queuing up to be Co-operative MPs. Because, we know, on the doorstep the values of our movement and the difference we make really makes a difference.’
Mr Balls admitted that it had been a ‘tough week’ for the Co-op movement, with Flowers having just been forced out.
But he added: ‘Let’s be completely honest: the performance of the Co-operative group over recent years has been fabulous, across all its many different retail businesses.
And actually, as a bank, the Co-operative bank was one of the institutions which came through the financial crisis strong enough to step in and help other organisations in difficulty and in trouble.
‘That commitment to local engagement, and to local values, the ability to innovate – that is important for the future.’
During the dinner there was an auction for Mr Balls to make a lasagne for the Co-operative member who made the winning bid. The auction proved so popular that Mr Balls promised to make lasagnes for two members who had each bid £4,000.
Last night a Labour source said Mr Balls had also talked in his speech about the difficulties at the bank, how there had been a change of management and that there were significant challenges ahead.
The Treasury was also dragged into the Co-op scandal last night after former Tory leadership contender David Davis questioned why officials had not spotted its financial problems years ago.
Regulators and Treasury staff should have noticed its shortcomings back in 2011, the MP said, when the financial problems were becoming visible.
The Co-op’s financial woes were set out in a letter in January 2012 to the Lloyds board when it made its doomed bid to take over the banking giant. The letter was written by Lord Levene, a city veteran who was heading a rival bid.
Mr Davis said that should have set alarm bells ringing to the Treasury, Lloyds and UK Financial Investments, which handled the Government’s stake in the Co-op.
Paul Flowers' £63k of expenses in 3 years
Paul Flowers racked up a £63,000 expenses and allowances bill at Bradford Council before he was forced to resign over the discovery of porn on his laptop.
The Daily Mail has learned that the disgraced former Co-op boss received the cash over three years while he was a councillor at the authority.
Last night a local government minister urged the authority to find out whether the claims are genuine.
Earlier this week this newspaper revealed that Flowers is suspected of claiming as much as £75,000 in false expenses while heading a drugs charity.
Paul Flowers claimed £63k in expenses while serving as a councillor in Bradford
He made claims for ‘a lot of dining’ and frequent hotel stays and travel, but resigned from the Lifeline Project before internal proceedings against him could be concluded.
The Co-op is also trawling through his expenses claims amid claims he may have used some of its money to fund his sordid lifestyle.
It is believed that the head of the Co-op Group became concerned about Flowers’s ‘excessive use of expenses’ before he resigned.
The Methodist minister claimed £63,103.77 in allowances, expenses and other perks from Bradford Council – £13,362.84 in 2009/10, £35,091.37 in 2010/11 and £14,649.56 in 2011/12.
Brandon Lewis, a Tory local government minister, said: ‘This level of expenses seems suspiciously high and should be investigated.
A full breakdown of what these expenses were and the business case for them needs to be looked at.’ Flowers resigned after adult material was found on his computer, but colleagues were told at the time that he left because of pressures of his work at the Co-op bank.
The council’s chief solicitor, Suzan Hemingway, said all the claims had already been checked.
‘All councillors’ allowances and expenses are a matter of public record and are published on our website dating back to 2004/5,’ she added.
‘The basic allowance payable to all councillors is currently £13,042.94 a year.
‘Special responsibility allowances are paid to councillors who have significant additional responsibilities such as being a member of the executive.
‘Claims for travel, accommodation or meals are checked before any payments are made. The system for making payments is regularly audited.’
But Robert Oxley, of the TaxPayers’ Alliance, said: ‘Given Mr Flowers’s track record of expenses, taxpayers will be rightly concerned about how these councillor’s allowances may have been used.
‘It further adds weight to the need for a full and proper investigation into what’s happened during his time in power.’
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