George Osborne defends Government's role in Co-op Bank's Lloyds takeover plans

George Osborne has defended the Government's involvement in plans for the Co-operative Bank (Getty)

George Osborne has defended the Government's involvement in plans for the Co-operative Bank to take over branches of Lloyds, insisting the collapse of the deal showed the "system worked".

The Chancellor attempted to distance the Treasury from criticism about the way checks were made on the bank as the fallout continues from allegations about former chairman Paul Flowers' alleged drug-taking.

Alarm bells rang and were heard when the Co-op was bidding to take over 632 Lloyds branches, he said.

Mr Osborne also denied claims that Treasury minister Mark Hoban held 30 meetings with Mr Flowers.

He told BBC Radio 4's Today programme: "I don't think it is correct that he met Paul Flowers 30 times.

"But, look, we are having an independent inquiry into what went on in the Co-op and I would just make this point, which is the first priority is to save this incredibly important bank.

"It has 600,000 customers, many thousands of people work for the Co-op and will be anxious about their jobs, and a huge amount of my time and the time of the Treasury is spent on making sure this bank survives and survives in a way that does not depend on a taxpayer bailout, which we want to move away from in this country."

Mr Osborne said of the failed attempt for a deal between Lloyds and the Co-op: "The key point is this - it didn't happen. In other words, the system worked.

"Here the system worked because actually when we saw the Coop was in no fit state to take over the Lloyds branches, the alarm bell rang, the alarm bell was heard and that is why our system is working."

Mr Osborne added: "We didn't know the circumstances around the fact that he had resigned as a councillor for the Labour Party in Bradford and we are also not in the same position as the Labour Party, who is currently taking money and soft loans from the Co-op at the very moment that this institution is in trouble, where bond holders are having to make sacrifices, pensioners who rely on the income from those bonds are having to make sacrifices, where people working for the Co-op face losing their job and at the same time the Labour and Co-operative movement is taking cash and soft loans."

PA