MPs vote for parliamentary inquiry into Libor scandal Negotiations began on Thursday between the government and Labour over setting up a parliamentary inquiry into the banking scandal rocking the City of London, with the promise that it could begin work in two weeks. After a bad-tempered Commons debate, MPs voted by a majority of more than 100 to set up a joint committee of MPs and peers to conduct the inquiry after earlier rejecting a Labour proposal for a judge-led public inquiry similar to the ongoing Leveson inquiry into press standards. However, there was confusion over what the committee would be examining and whether the government's hope that a report could be made before Christmas was possible. Following the vote, the shadow chancellor, Ed Balls, said Labour would respect the decision and co-operate with the inquiry, starting with negotiations about the membership and secretariat and its powers. Balls said, though, that he would keep arguing for a wider inquiry. "The prime minister and the chancellor have made a very grave error of judgement," he said. And any time any future scandals emerge, people will ask, why are we not having the full independent inquiry that this country needs? Earlier in the day, Labour leader Ed Miliband visited a small business in Putney, west London, which has had to lay off staff after being advised to take out a loan on a 10-year swap. Henderson Signs, which makes signs for estate agents and auctioneers, has lost £400,000. Under the highly complex arrangements with NatWest and RBS, the company found the interest charged on its loan increasing dramatically even though the Bank of England base rate fell during the credit crisis. Miliband said: "I will be demanding that the FSA widen its scope to make sure the people like the Hendersons are included. We can't have a situation where people like them, who have so clearly been fleeced in the most reprehensible way, are excluded. ends. In the Commons debate, chancellor George Osborne and traded insults with Balls in a row triggered by an interview published in the Spectator in which Osborne said people working with Gordon Brown under the last Labour government were "clearly involved" in the scandal of manipulation of the interbank lending rate, Libor. Osborne claimed the "Brown circle" included Balls, who worked as an adviser to the former chancellor Alistair Darling and then as City minister, and that he had "questions to answer." Balls demanded Osborne provide evidence of his accusation or retract it and apologise. Balls said the allegation was "utterly false." The cheap and partisan and desperate way in which you and your aides have conducted yourselves in recent days does you no good. It demeans the office you hold and, most important, it makes it harder to achieve the lasting consensus we need," said Balls. Osborne pointed to testimony to the Treasury select committee on Wednesday by former Barclay's chief executive Bob Diamond that ministers in the previous government had been keen for the Libor rate to be lower. "The idea that I'm going to take lessons in integrity from the man who smeared his way through 13 years of Labour government ... is another thing," said Osborne. who also cited the admission by Balls' former colleague at the Treasury, Lady Vadera, that she had seen a report by the UBS bank on reducing Libor rates. The debate was so full of shouting and interruptions that, after several interventions by the deputy speakers, the experienced Conservative backbencher Bernard Jenkin chastised fellow MPs: "Many of the public will be looking at this debate and scoffing at our self-importance and arrogance." Labour called the debate after a week-long dispute over who should lead an inquiry and what it should cover following revelations last week that traders at Barclay's bank had manipulated the Libor rate between 2005 and 2009 to make it look lower and therefore reduce concerns about the bank's stability. Prime minister David Cameron had said the inquiry should be a "swift and decisive" look at the Libor scandal with a view to legislating for any changes needed next year, while Labour called for a wider report into the culture of the banking industry which would take in other recent scandals such as the mis-selling of financial products to small businesses. Opening Labour's debate, Balls rejected the government's three reasons for opposing a Leveson-style public inquiry. He said the problems with the banking industry were "much much wider" than the Libor problems and so merited a wider inquiry; Labour's plan would enable MPs to have a report on the Libor fixing scandal by Christmas, before the expected banking bill in January; and a public inquiry would have greater powers to force witnesses to give evidence under oath and request documents. "Only a judge led inquiry can truly persuade the public that the inquiry is truly independent and objective," Balls said. Osborne said wider banking issues had been considered by the Vickers commission on banking, which reported in 2011 and is to be the basis of a banking bill early next year. The chancellor insisted the proposed joint committee of MPs and Lords could be given tough powers, using standing orders or legislation if necessary. Andrew Tyrie, the Conservative chairman of the Treasury select committee, said in the debate that the inquiry should not be a "witch-hunt" and the terms of reference should be "tightly drawn." The prime minister's official spokesman told reporters later there would be a separate independent review of Libor by Martin Wheatley, who is to head the Financial Conduct Authority when it is spun out of the Financial Services Authority next year, while the parliamentary inquiry would "get into these other issues of culture and standards in banking." There was uncertainty over the speed of the parliamentary inquiry after the attorney general, Dominic Grieve, the government's most senior law officer, made a rare intervention in the debate to tell MPs that Labour's suggestion for a two-part inquiry, firstly into Libor and later into the wider banking culture, could clash with ongoing criminal investigations into the Libor rigging, throwing the government's own timetable into doubt. The apparent discrepancy was leapt on by Labour. "If it's too short for one [inquiry], how come is the right length for the other," said Balls. And when there's a complex issue like this, the idea judges would make that fine legal judgement worse than a parliamentary committee is nonsense. Grieve had been "very helpful," said Balls. Under the highly complex arrangements with NatWest and RBS, the company found the interest charged on its loan increasing dramatically wheneven though the Bank of England base rate fell during the credit crisis.