David Cameron was accused yesterday of dragging the Tories into the gutter with attempts to smear Labour amid the scandal over former Co-op Bank chief Paul Flowers.

Labour frontbencher Yvette Cooper accused the Prime Minister of "a return to the nasty party" and said he had overseen a "real deterioration" in the Tories' politics.

Ms Cooper told the BBC that Labour's connection to the Co-op had "nothing to do with Mr Flowers and it is just smear and the politics of the gutter for the Tory Party to keep pushing this."

The row over the Co-op Bank's near collapse and Mr Flowers's alleged drug problems intensified over the weekend as Ed Miliband accused his opposite number of "desperate" smears.

Mr Cameron used PMQs to announce an inquiry into the Co-op - which the Labour leader said was a sign the Tories planned to fight the "dirtiest general election campaign" for 20 years.

He said Mr Cameron "hit a new low" by trying to use Mr Flowers's misconduct "to impugn the integrity of the entire labour movement."

Labour hit back by pointing to George Osborne's cheerleading for the Co-op's doomed attempt to buy more than 630 branches of taxpayer-backed Lloyds.

Former City minister Lord Myners questioned how much pressure the Chancellor and Tory MP Mark Hoban had applied.

The Labour peer said: "Mark Hoban, we are told, had over 30 meetings with the Co-op - that, from my experience as a minister, is an extraordinarily high number of meetings. That needs to be investigated."

Shadow financial secretary Cathy Jamieson said ministers rejected three attempts to introduce an annual competence check for top bankers.

The opposition will again push for the measure when the bank reform Bill returns to the Lords this week.

Ms Jamieson said: "There are now mounting questions for the government to answer about how the Co-op Bank got into trouble on its watch."

Meanwhile Labour insisted its finances were secure despite reports that it may have to pay off £2 million in loans from the Co-op and sister bank Unity Trust before the 2015 election.

A spokesman said the loans "are being repaid in accordance with formal long-term commercial agreements and the Labour Party is on a secure footing."