Culture Secretary Jeremy Hunt exchanged text messages with James Murdoch even after being given "quasi-judicial" responsibility for News Corp's takeover of BSkyB, the Leveson Inquiry heard yesterday.
Records retrieved from Mr Hunt's phone also suggest George Osborne played a behind-the-scenes role in the Government's handling of the £8bn bid, raising new questions about the Chancellor's relationship with the Murdochs.
Mr Hunt also admitted he considered resigning when texts emerged showing the extent of the contact between his special adviser Adam Smith and the News Corp lobbyist Fred Michel. He told the inquiry he "did think about my own position" when Mr Smith stepped down.
However, last night David Cameron insisted there had been no breach of the Ministerial Code and made clear he was staking his reputation on Mr Hunt clearing his name.
Text records released to the inquiry showed Mr Hunt and Mr Osborne exchanging messages in the hours after anti-Murdoch remarks by Vince Cable were made public. Mr Hunt texted the Chancellor asking to talk about the takeover, saying he was "seriously worried we are going to screw this up". Mr Osborne texted back: "Hope you like the solution" – and then Mr Hunt was handed responsibility for deciding on the bid.
The revelation makes it much more likely that Mr Osborne will be made to give evidence to the Leveson judicial inquiry, and to reveal the contents of his own texts and emails to the Murdoch empire.
Other emails released yesterday show the depth of concern in Downing Street and in Mr Hunt's own department about whether the Culture Secretary's previous noisy support for the Murdochs was clear evidence of bias and must rule him out of handling the deal. But Downing Street said the Prime Minister had no intention of calling an inquiry into whether Mr Hunt had broken the Ministerial Code and dismissed Labour claims that the Culture Secretary had misled Parliament.
Labour deputy leader Harriet Harman said: "David Cameron should never have given the decision to Jeremy Hunt in the first place, because he was clearly already biased."