Labour acted with ‘utmost integrity’ over Co-op

Mr Miliband faced questions over why Mr Flowers had been brought on to the party’s business advisory group and further questions about the party’s links to the former bank chairman, who has also been accused of incompetence.

Mr Flowers is also accused of claiming £75,000 in false expenses from a drugs charity. The chief executive of Lifeline said that he had raised questions over Mr Flowers’ expenses claims in 2004 and there had been an investigation, during which the former Methodist minister had to account for his claims item by item, Sky News reports.

David Cameron on Wednesday announced an inquiry into the Co-operative Bank‘s failing finances and the decision to appoint Mr Flowers, a former Labour councillor who faces police questioning over allegations that he bought illegal drugs.

Mr Miliband has now hit back, saying that his links to Mr Flowers were not as close as Mr Cameron had made out. “Paul Flowers was somebody who I met with on one occasion and had meetings with a wider group on a couple of other occasions. He was never my close adviser,” he told ITV News.

“The important thing now is to make sure that the Co-op can go from strength to strength in the future and the police need to look at any matters that arise for them.”

Asked if he welcomed the inquiry, Mr Miliband said: “Let’s see what the government proposes. What I am utterly confident about is the Labour Party always acts with the utmost integrity and we did on this occasion too.”

Read more: The Co-op, Paul Flowers and Labour – what we know

Mr Flowers, who led the Co-op Bank for three years until 2013, is being investigated by the police for allegedly buying and using illegal drugs including crystal meth, crack cocaine and ketamine. He has also been suspended indefinitely by the Methodist Church.

Mr Cameron announced on Wednesday that Chancellor George Osborne was in discussions with financial regulators over what form the inquiry should take.

At prime minister’s questions in the House of Commons, Mr Cameron told MPs that there were “clearly a lot of questions that have to be answered” in relation to the Co-Op Bank.

“Why was Rev Flowers judged suitable to be chairman of a bank? Why weren’t alarm bells ringing earlier, particularly by those who knew? I think it will be important in the coming days that if anyone does have information they stand up and provide it to the authorities,” he said.

Read Gary Gibbon's blog: Cameron laps up Labour Co-op discomfort

Tory chairman Grant Shapps also challenged Mr Miliband to explain Mr Flowers’ position on Labour’s business advisory group and to return a £50,000 donation to Mr Balls’ office that he had backed.