'It's fair to say we were useless against Diamond' - Leadsom

As the Select Committee faces more figures in the Libor affair, Angela Leadsom tells Oliver Wright about MPs' limited powers

Andrea Leadsom was widely praised for her performance when Bob Diamond appeared before MPs last week

When Paul Tucker takes his place in front of Parliament's Treasury Select Committee today, there is one MP in particular of whom the Bank of England deputy governor will be wary. At an otherwise tetchy, unilluminating cross-examination of the former Barclays chief executive Bob Diamond last Wednesday, Andrea Leadsom stood out. Her caustic, forensic and knowledgeable questioning did what her colleagues failed to do: make Mr Diamond squirm.

Those commenting on the debate gave an instant verdict. "Andrea Leadsom is utterly, frighteningly good," The Independent on Sunday's political editor, Jane Merrick, wrote. Her Guardian counterpart, Patrick Wintour, added: "At last, someone who knows what they're talking about."

Now Ms Leadsom, 49, who has been in Parliament only since 2010, is turning her mind to her next inquisitions: first Mr Tucker, who will appear before her committee today, and then Marcus Agius, the outgoing Barclays chairman, who will appear tomorrow.

Her great advantage over some other members of the committee is that in some ways she is a poacher-turned-gamekeeper and has come across these characters before. Not only did she work in the banking sector for more than two decades before becoming the Conservative MP for South Northamptonshire, she also worked for a long time in the 1990s at Barclays, and so knows the procedures, rules and safeguards that should have prevented the interest rate scandal from happening – or at least have exposed it much sooner.

She does not mince her words when asked what she thought of Mr Diamond – and his honesty in evidence. "He was ridiculously unbelievable," she almost spits. "When he said, at one point, he was 'physically ill' I felt like saying, 'Can we see the sick bucket because otherwise we're not going to believe you'. Terrible. Absolutely terrible."

Leadsom cites his delaying tactics, faux naivety and the chummy use of MPs' first names as things which particularly irritated her. "Oh my goodness," she exclaims. "He started it with Jesse Norman. Right from the word go I was like, 'Don't call him Jesse'.

"I was sitting there thinking I don't want him to call me Andrea – but of course when it came to my turn I thought if I say, 'You call me Mrs Leadsom' everybody will be saying, 'Get her – she has to be Mrs Leadsom'. So I decided I'm just not going to go there.

"But the point is this was a formal inquiry on an extremely serious point. The committee were representing the interests of the British people. That is why he needed to address us in formal terms. It's not a rule but it is about a sense of the occasion and the importance of the matter. It is respect for Parliament."

She concedes that, as a whole, the committee failed to land a killer blow against Mr Diamond – but believes his failure to answer their questions in a straightforward manner told its own story.

"I don't think we felt we did a fantastic job either," she replies when asked about the perception that they had let Mr Diamond off the hook. "It's a fair criticism to say 'You guys were useless'. The problem is we had about seven minutes each. Bob Diamond knew that.

"There was also the weight of expectation. Individual members of the committee were probably not quite as nervous as Diamond but, for sure, none of us slept great the night before. We [also] had great weaknesses in that we didn't have email trails. We didn't have recordings of the morning meetings where you could point to what had been said.

"All we really had were the regulator's reports, what we'd seen in the media, what Barclays had put out, what the Bank of England had put out. So in a sense we were batting in the dark. You have to ask yourself, what would have worked better?"

A judge-led inquiry? Ms Leadsom almost looks like she is going to break party ranks and agree – but then quickly steps back into line. "A judge-led inquiry would be better on the cross-questioning, but then a judge would also struggle in the face of someone not prepared to answer the question or give you anything," she says.

"What Parliament can do is be directly rude and abusive to a witness to try and break them out of their shell. That's not something that a lawyer and a judge would do.

What is interesting talking to Ms Leadsom is to see just how far the debate about bankers and banking has changed as a result of the Libor scandal. One might think that as a former banker herself and a Conservative, she might take the view that Libor was a one-off and that Britain's banking industry does not need the type of fundamental overhaul advocated by Ed Miliband and the left. But not one bit of it.

"Previously the issue with banks was about arrogance and greed but the Libor scandal is a whole new dimension," she says. "Arrogance and greed is one thing but lying, fraud, embezzlement is just a completely new low. And it was so casual – shouted out across the room – with absolute disregard for the trust in which banks are placed.

"There no doubt that this is a line in the sand and we have to make sure it can't happen again. That means regulators having such sharp teeth that if you ever transgress – or are complicit – you need to go to prison. The regulators owe that to the British public.

"We need equal amounts of fear and greed. The greed is fine, but if you scuff up in any way – like has gone on now – then you will be held accountable and that means a jail sentence and never working in finance again. It's the only deterrent that's actually going to work."

She also fears that this may not be the end of the revelations – which makes it vital to act now. "Libor may not be the only thing we have to worry about it," she says. "There may be other aspects of banking that h ave been rigged. Now is the time we have to get to the bottom of all of it and get all the washing out."

Barclays grilled: Leadsom vs Diamond

Leadsom: Do you live in a parallel universe to the rest of the UK?

Diamond: Andrea, I am just going to say it again. The behaviour, when it came up, was between 2005 and 2007, primarily. There were few instances after that. There have been none since the investigation started. It is wrong, it is reprehensible, it makes me angry, it makes me disappointed, and it puts—particularly coming out in this way—a real stain on an organisation...

Leadsom: There are 173 separate recorded requests for rate fixing to be done, either up or down, plus 58 for Euribor, 26 for Yen Libor and 11 requests coming from ex-Barclays traders who are now at other banks asking Barclays submitters to fix rates on their behalf, so when you say it was limited to a small group of traders, there was clearly a significant amount of collusion going on.

Diamond: They were not looking to fix rates; they were looking to impact the Libor submission.

Leadsom: Can you answer the question?

Diamond: It's wrong... I don't want to leave any impression about how sorry I am, how angry we are or how disappointed we are... It is not OK. No one is saying this was OK.