The political row over the Co-op Bank’s near collapse and the revelations about Bradford Methodist minister Paul Flowers has intensified, with Ed Miliband accusing David Cameron of “desperate” smears over Labour’s links to the lender’s former chairman.

The Labour leader claimed Mr Cameron reached a “new low” at Prime Minister’s Questions by using Mr Flowers’ troubles to “impugn” Labour’s integrity.

But Tory chairman Grant Shapps insisted Mr Miliband’s response was “ludicrous” and stepped up pressure on Labour over the deal which saw the Co-op merge with Britannia.

Mr Shapps said there were “conflicting reports” about how much the Labour leadership knew about Mr Flowers’ past, which included him standing down as a Labour councillor for Great Horton on Bradford Council after pornography was found on his computer.

Labour has said Mr Miliband and Shadow Chancellor Ed Balls did not know about the reason why Mr Flowers quit in 2011.

But Mr Shapps responded: “You are telling me that they didn’t know. I’m not sure that’s clear at all, I have heard conflicting reports on that.

“Arguing about what they knew and when, I think there’s a much bigger issue here.”

The Tories have sought to highlight the links between Labour and the Co-op, including “soft loans” at preferential rates and a £50,000 donation to Ed Balls’ office from the Co-operative Group.

But Labour have used the row over the near collapse of the lender to put pressure on George Osborne over his support for the Co-op’s bid for the Lloyds branches.

Mr Shapps said a review announced would examine all the issues.

“That is why it is so important to have a proper independent review,” he said.

“What I can’t understand is when you announce a proper independently-run review the response you get to these serious questions ... the response you get is ‘oh, this is a smear’.”

Mr Flowers, 63, who has been bailed after being questioned by police officers “investigating allegations of drug supply offences”, stepped down as Co-op Bank chairman in June and questions have been asked about his competence in the role.

He was suspended by the Methodist Church and the Labour Party following the allegations that he bought and used illegal drugs.

Mr Miliband accused the Tories of mud-slinging in an effort to win the 2015 election, highlighting Mr Cameron’s decision to attack Labour’s Co-op links at Prime Minister’s Questions.

Mr Miliband said Mr Cameron “hit a new low by trying to use the gross errors and misconduct of one man, Paul Flowers, to impugn the integrity of the entire Labour movement”.

Meanwhile, Greater Manchester Police have made an arrest in an alleged plot to kidnap a male escort who made newspaper claims about Mr Flowers.

Following his revelations to a newspaper this week, the 31-year-old man reported to police that he received threatening text messages to his mobile phone.

A 29-year-old man was later arrested on suspicion of conspiracy to kidnap. He has since been bailed.

In a development over the weekend, a national newspaper reported that Mr Flowers racked up a £63,000 expenses and allowances bill over a three-year period at Bradford Council.

Tories said the total seemed high but the Council’s City Solicitor, Suzan Hemingway said all claims had been checked.