MPs will decide whether Parliament or a judge should stage an investigation into the banking scandal.

George Osborne has accused members of former Prime Minister Gordon Brown's administration of being "clearly involved" in it.

The Chancellor claims Labour should face questions about lending rate-rigging to establish "who knew what and when".

Ex-Barclays chief executive Bob Diamond said he felt "physically ill" when he discovered traders had fiddled the key Libor rate and blamed a "series of unfortunate events" for his shock departure from the bank, as he fended off calls to give up his multimillion-pound bonuses.

Mr Diamond told MPs that Bank of England deputy governor Paul Tucker had relayed concerns in Whitehall about Barclays' high Libor rates to him in a phone call in October 2008.

He believed Mr Tucker was trying to warn him that "there are ministers in Whitehall who are hearing that Barclays is always high, that could lead to the impression that you are not funding yourself".

But he told the Treasury select committee: "My recollection is Paul did not mention who he was referring to or I would have put it in the note."

Labour wants an independent "forensic" judicial public inquiry, claiming it is the only way to restore public faith in the disgraced industry.

However, the coalition insists a parliamentary investigation is the best way to get speedy recommendations that can be included in a banking reform Bill early next year.