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A new book promising to lift the lid on allegedly declining standards in British journalism has instead ignited fierce media speculation over relations between Britain's oldest Sunday newspaper The Observer and its sister title The Guardian.

Veteran investigative journalist Nick Davies's forthcoming book, Flat Earth News, is billed as an insider's view on a "profession corrupted to the core" where journalists are content to peddle myths "from the millennium bug to the WMD in Iraq" – dressed up as genuine stories.

Most damaging among the Guardian writer's claims, said to target all newspapers, is that the Government's notorious dodgy dossier, used to justify the invasion of Iraq, was partly crafted by The Observer's then political editor Kamal Ahmed.

Mr Ahmed yesterday strongly denied the claims insisting he had absolutely nothing to do with the dossier, which was delivered to journalists under their hotel room doors during a Prime Ministerial trip to Washington in the run up to the war in January 2003.

The dossier, which followed an earlier document claiming Saddam Hussein possessed weapons of mass destruction capable of launching in 45 minutes, was eventually found to contain material lifted directly from general sources rather than based on top level military intelligence.

According to reports in yesterday's Mail on Sunday, the book cites sources at The Observer saying Mr Ahmed – once tipped to be Fleet Street's first non-white editor and recently appointed communications director at the Equality and Human Rights Commission – claimed to have helped edit the document.

The Sunday Times meanwhile suggested the book would "hint" that Mr Ahmed had advised Tony Blair's spokesman Alastair Campbell on the contents of the dossier and offered views on how it should be presented to journalists.

Mr Ahmed said yesterday: "It is simply not true. I don't know where Nick Davies got this from. I simply don't know. Nick Davies approached me some months ago and made allegations of a similar type but I told him they were completely untrue."

The Observer, unlike The Guardian, was among the most vociferous supporters of military intervention in Iraq. Fellow political editors who also accompanied Mr Blair on the crucial summit with George Bush recall Mr Ahmed spent time "up front" with the Prime Minister's entourage during the flight to the United States.

One said yesterday: "He was there for a long while and we thought he was getting a briefing for a brilliant story. But nothing ever appeared. Then, when we arrived in Washington, we were handed the dossier under the door."

Mr Davies failed to return calls from The Independent yesterday. However, the fact such a prominent and respected journalist is ready to attack a high profile colleague such as Mr Ahmed was seized on by rivals as evidence of enduring bad blood between the two newspapers.

The Scott Trust, which owns both papers, insists The Guardian knew only of Mr Davies's intention to write a book on the media though not the full details of its content.

It comes amid mounting industry speculation, despite reassurances from management, that a closer merging of the two papers to save money is being resisted by staff, concerned it could damage the separate identities of the title.

And it follows a recent Observer story headlined "New health fears over big surge in autism", that was comprehensively rubbished in Ben Goldacre's Guardian column "Bad Science" a few days later. The Observer later published a lengthy clarification.

In the publicity for Mr Davies's book, his publishers claim: "Davies names names and exposes the national stories which turn out to be pseudo events manufactured by the PR industry, and the global news stories which prove to be fiction generated by a new machinery of international propaganda."

Mr Ahmed said his relationship with The Guardian editor Alan Rusbridger was strong and healthy.

A spokesman for Guardian News & Media said the relationship between the two papers was "extremely strong at every level". He said: "This is all utter nonsense peddled by rival newspapers whose own internal feuds make the Borgias look tamein comparison."

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