The Co-operative Bank has come under fire for dishing out £33.2million in cheap loans and overdrafts to Celtic Football Club, which was chaired by former Labour home secretary John Reid.
MPs last night demanded an explanation for the rock bottom interest rates and accused the mutual of using the ‘hard-earned cash of millions of savers for political gain’.
It is the latest twist in the row over the troubled lender’s links with the Labour Party.
Glasgow-based Celtic was chaired by Lord Reid, the former home secretary under Tony Blair, between 2007 and 2011.
Labour’s former energy minister Brian Wilson joined the Celtic board in 2005 and remains a director.
Insiders said the loan pre-dates both Wilson and Reid’s arrival at the club.
But Celtic has long-established links with Labour, which has controlled Glasgow City Council since the 1970s.
The latest company accounts for Celtic show it has a £12million overdraft facility charging an average of 1.5 per cent over the year to June 30 2013.
This is based on one percentage point above the Bank of England’s base rate, which is currently 0.5 per cent.
The remainder is made up of a £21.2million long-term loan, with an average rate of 1.65 per cent. This makes even Labour’s recent £1.2million cheap loan at 4 per cent – or 3.5 per cent above Base Rate – look expensive.
Co-op’s hugely generous terms once again highlight the close links between the scandal-hit lender and the upper echelons of the Labour Party.
The political connection has come under the spotlight after former Labour councillor and former Co-op Bank chairman the Reverend Paul Flowers was caught out allegedly organising drug-fuelled orgies with rent boys.
Mark Garnier, the Conservative MP and member of the Treasury Select Committee, said: ‘The questions about Labour’s influence over the management of the Co-op knows no limit. It now seems that cheap loans are available to organisations where Labour ministers have significant influence as well as directly to the Labour Party itself.’
He added: Why were Labour and their friends receiving cheap loans? What political outcomes was the Co-op trying to buy? Were the millions of savers at the Co-op bank told their hard-earned cash was being used for political gain? Have any of the Labour-related soft loans contributed to the £1.5billion black hole in the Co-op balance sheet?’
The first deadline to vote on a rescue package to plug a £1.5billion black hole in the lender’s finances falls at 4.30pm on Friday.
The Co-operative Party, the political wing of the Co-op, is the sister party of Labour.
In order to help shore up its finances Co-op Bank stopped lending to small firms in May.
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