George Osborne has defended the Government’s involvement in plans for Co-operative Bank to take over branches of Lloyds, insisting the collapse of the deal showed the “system worked”.

The Chancellor attempted to distance the Treasury from criticism about the way checks were made on the bank as the fallout continues from allegations about former chairman and Bradford Methodist minister Paul Flowers.

Alarm bells rang and were heard when the Co-op was bidding to take over 632 Lloyds branches, Mr Osborne said.

He also denied claims that Treasury minister Mark Hoban held 30 meetings with the Reverend Flowers.

He told BBC Radio 4’s Today programme today: “I don’t think it is correct that he met Paul Flowers 30 times.

“But, look, we are having an independent inquiry into what went on in the Co-op and I would just make this point, which is the first priority is to save this incredibly-important bank.

“It has 600,000 customers, many thousands of people work for the Co-op and will be anxious about their jobs, and a huge amount of my time and the time of the Treasury is spent on making sure this bank survives and survives in a way that does not depend on a taxpayer bailout, which we want to move away from in this country.”

Mr Osborne said of the failed attempt for a deal between Lloyds and Co-op: “The key point is this – it didn’t happen. In other words, the system worked.

“Here the system worked because actually when we saw the Co-op was in no fit state to take over the Lloyds branches, the alarm bell rang, the alarm bell was heard and that is why our system is working.”

Mr Osborne also reiterated that the Treasury had not been told the reason why Mr Flowers had resigned as a Labour councillor in Bradford in 2011. It has subsequently been announced that pornographic material was found on his Council laptop.