THE Conservatives have been accused of using the "politics of the gutter" as the war of words with Labour over the scandal-hit Co-op Bank and its disgraced former chairman Paul Flowers intensified.

Ed Miliband claimed David Cameron had resorted to desperate smear tactics in a bid to exploit Labour's links to Reverend Flowers, a Methodist minister.

But Grant Shapps, the Tory Chairman, continued the attack, branding the Labour leader's response "ludicrous" and he stepped up pressure on the Opposition over the damaging deal, which saw the Co-op merge with Britannia.

Mr Miliband said the Prime Minister had "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".

He added: "His main ­political strategy is now to sling as much mud as possible in the hope that some of it sticks. When he does so, he demeans his office."

Yvette Cooper, the Shadow Home Secretary, said the Conservatives had returned to being the "nasty party", adding: "It is just smear and the politics of the gutter for the Tory Party to keep pushing this."

In 2011, Mr Flowers quit as a Labour councillor after pornography was found on his computer.

The 63-year-old has been bailed after being questioned by police officers "investigating allegations of drug supply offences".

Yesterday, Mr Shapps said Labour knew about the background to why Mr ­Flowers had quit the party, noting: "If Ed Miliband didn't know about that, then why didn't he know about that?"