George Osborne has said he hopes Labour "see sense" and take part in a parliamentary inquiry into what went wrong at Barclays in the wake of the rate-fixing scandal.
On Monday David Cameron proposed a cross-party committee of MPs and peers headed by Treasury committee chair Andrew Tyrie launch an investigation into the bank.
Barclays chief executive Bob Diamond resigned with immediate effect on Tuesday morning. The move comes days after the bank was fined a record £290m for manipulating the Libor, the rate at which banks lend to each other.
However the Labour Party has said that does not go far enough and has called for a judge-led independent inquiry. Ed Miliband has argued that the public will not trust an inquiry which sees politicians investigating bankers.
"Politicians investigating bankers will not command the consent of the British people," he told MPs on Monday."I don't believe the proposed way forward is a way we can build the consensus of what is required."
Peers will vote on Tuesday whether to support a Labour amendment that would see the creation of a judge-led independent inquiry.
Speaking to BBC Radio 4's Today programme on Tuesday morning, Osborne said he expected Labour to come on board with the parliamentary route by the end of the day.
"I think once Labour lose the vote today, as I suspect they will, I think they will see sense and join in with an inquiry which I want to command all-party support," he said.
However he struck a partisan tone by suggesting it was former Labour ministers, including Ed Miliband and Ed Balls, who had the most to fear from an investigation.
"I think the people who would be most afraid of where any inquiry goes will be the people who were in charge at the time," he said.
He added: "No-one more than me would like to see Ed Balls in the dock."
The government's plans for an parliamentary inquiry may be left dead in the water however if Labour refused to take part, as its proposed chair, Tyrie, has indicated he will refuse to lead it if does not have cross-party support.
"I am certainly not going to want to run an inquiry that is in any sense partisan or perceived to be partisan. I would not be prepared to participate if that were the case," he told the BBC.
In a statement on Tuesday morning Bob Diamond said: "No decision over that period was as hard as the one that I make now to stand down as chief executive.
"The external pressure placed on Barclays has reached a level that risks damaging the franchise - I cannot let that happen.
"I am deeply disappointed that the impression created by the events announced last week about what Barclays and its people stand for could not be further from the truth."
The chancellor told the BBC that Diamond’s resignation was “the right decision for Barclays” and the “right decision for the country”.
In a statement, Ed Miliband said that Diamond's resignation was "necessary and right," adding: "It was clear Bob Diamond was not the man to lead the change that Barclays needed.
"But this is about more than one man. This is about the culture and practices of the entire banking system which is why we need an independent, open, judge-led, public inquiry."