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THE former prostitute who insists she watched George Osborne snort “a big, fat line of cocaine” yesterday challenged him to sue her.

The Chancellor has denied Natalie Rowe’s allegations that he took the class A drug when they were friends in his youth.

But Ms Rowe, who worked as a dominatrix called Mistress Pain at the time, called a radio station to defend her claim.

And she said: “If Osborne has a problem, then sue me.”

The Cabinet minister first faced drug accusations six years ago when a photo of him with his arm draped around the former vice girl surfaced. Mr Osborne denied her claim that a line of white powder on the table in front of them was cocaine

He also denied he had taken the drug at a party in 1994 when he was 24 years old.

The Chancellor’s friends again said Ms Rowe was wrong after she went on Australian TV to repeat her story on Monday.

But the 47-year-old former madam, who ran Black Beauties escort agency, called London’s LBC radio station to hit back.

Accusing the Chancellor of trying to smear her, she said: “He’s a Chancellor and he should tell the truth. At the end of the day if you want to make laws and rules about drug-taking, you can’t be a hypocrite and he is.”

Ms Rowe added: “I know George Osborne in a different way than the public because I knew him on a personal level.

“He could have said nothing but he chose to taint me and make me look as if I’m some crazed dominatrix who was touting her story to make money. That isn’t the case.

“He needs to own up to his past. I know what went on.”

A source close to the Chancellor yesterday repeated: “The allegations are old and we deny them.”

David Cameron’s spokesman also defended Mr Osborne saying: “The Chancellor is 100% focused on the economy.”