Labour will attack government plans to hold a parliamentary inquiry into the banking sector on Thursday as George Osborne and Ed Balls traded partisan barbs over who is to blame for the Barclays rate fixing scandal.
In an emergency statement delivered in the Commons on Tuesday afternoon, the leader of the House, Sir George Young, said MPs would be given the chance to vote for either a parliamentary inquiry as favoured by David Cameron or a judge-led independent inquiry as called for by Ed Miliband.
On Monday the prime minister announced he wanted to see a special committee of MPs and peers, headed by Treasury committee chair Andrew Tyrie, to conduct an investigation into the rate-fixing scandal at Barclays.
But Tyrie has indicated he will refuse to head-up the inquiry proposed by the prime minister if it does not enjoy 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.
The debate on Thursday is likely to split down party lines with the Conservatives and Lib Dems voting in favour of a parliamentary inquiry and Labour voting for a judge-led Leveson-style investigation.
Miliband has argued that the public will not trust an inquiry into banking conducted by politicians.
The row over what sort of inquiry should be held became a political spat on Tuesday, threatening to sink any parliamentary inquiry before it got off the ground.
It has been reported that the government planned to "crucify" Labour if it voted against the creation of a parliamentary inquiry when it came to a vote.
And the opposition was likely to have been irked by both David Cameron and George Osborne sounding almost gleeful at the prospect of Ed Balls being "in the dock" over his regulation of the banks while he was City minister in the last Labour government.
Osborne also taunted Balls in the Commons on Monday, saying: "Put your hand up if you were the City minister when the Libor scandal happened."
Labour has also reacted angrily to reported comments, attributed to "government sources", claiming the party was trying to avoid an inquiry in order to "save Ed Balls' skin".
"The Government are in a state of panic," a Labour source told the Press Association. "They said they wanted to build cross-party consensus but then they are briefing against the Labour Party.
"It is a terrible way to behave. They are making it far harder for any inquiry to succeed."