Vince Cable was dealt a humiliating blow yesterday after an astonishing attack on Rupert Murdoch backfired. The Business Secretary managed to cling on to his job but has been stripped of the power to rule on Mr Murdoch's bid for full control of BSkyB.
The Liberal Democrat minister made outspoken comments to two undercover women reporters from the Daily Telegraph posing as constituents, saying he had "declared war" on the media magnate. In a single-party government, such comments from a minister with a quasi-judicial role in takeovers would almost certainly have forced him to quit.
Officials warned that his remarks had pre-judged the ruling he was due to make on the attempt by Mr Murdoch's News Corporation to buy the 61 per cent of shares in BSkyB it does not already own. But Mr Cable, the second most senior Liberal Democrat in the Government after Nick Clegg, was allowed to retain his Cabinet post.
Instead, his department was stripped of competition and policy issues relating to media, broadcasting and the digital and telecoms sectors. They have been transferred immediately to Jeremy Hunt, the Conservative Culture, Media and Sport Secretary. About 70 officials will switch departments.
Mr Hunt's involvement is likely to reassure Mr Murdoch, as Mr Hunt has been critical of Mr Murdoch's arch-rival, the BBC. In July, Mr Hunt said that Mr Murdoch "has probably done more to create variety and choice in British TV than any other single person". MPs believe the takeover is more likely to be waved through by Mr Hunt than if the decision had been left to Mr Cable.
The Telegraph reported today that another Liberal Democrat minister boasted that the party had thwarted Mr Murdoch's bid for full control of BSkyB. Norman Baker, the Transport minister, said: "We've referred it and that's another thing the Tories are furious about, you know. We've stopped Murdoch taking over BSkyB, or referred it to the competition authorities. That would have never happened under the Tories. They would have just said: 'Here you are Mr Murdoch, how much do you want?' "
Mr Cable, who had already referred the News Corp bid to the media regulator Ofcom, told the journalists in his Twickenham surgery: "I have declared war on Mr Murdoch and I think we are going to win."
He added: "I have blocked it using the ... legal powers that I have got. His whole empire is now under attack ... So there are things like that we do in government, that we can't do [in opposition] ... all we can do [there] is protest."
News Corp condemned Mr Cable's remarks, saying: "News Corp is shocked and dismayed by reports of Mr Cable's comments. They raise serious questions about fairness and due process." Officials warned Mr Cameron and Mr Clegg that the Government could have been hit by a judicial review had the decision remained in Mr Cable's hands.
Today The Telegraph publishes embarrassing comments by three other Liberal Democrat ministers which were also obtained by undercover journalists. Michael Moore, the Scottish Secretary, said that cutting child benefit for higher-rate taxpayers was "blatantly not a consistent and fair thing to do", while Ed Davey, a Business minister, said he was "gobsmacked" by the decision, and Steve Webb, the Pensions minister, said "the details aren't right".
The Labour leader Ed Miliband called for Mr Cable to be sacked: "David Cameron has made the wrong judgement and he has kept Vince Cable on, not because of the national interest but because his Conservative-led Government needs the prop which Vince Cable provides. Having apparently breached the ministerial code ... he shouldn't [remain] in office. I fear that David Cameron has made this decision ... because he is worried about the impact on his coalition of Vince Cable going."
Downing Street said: "The Prime Minister is clear that Mr Cable's comments were totally unacceptable and inappropriate." Mr Cameron and Mr Clegg were both furious with the Business Secretary but decided to allow him to carry on. They learnt about his remarks seconds after they had negotiated a joint press conference dominated by other comments the Business Secretary made to the Telegraph reporters. He had boasted that he could bring down the Government by resigning and described its fast-track public sector reforms as "a kind of Maoist revolution".
After Mr Cable issued a formal apology to his cabinet colleagues, the Prime Minister and his deputy both defended him. "I'm not in the slightest bit embarrassed that Vince is a prominent senior member of this Government," said Mr Clegg. "He has said he was embarrassed by the comments ... and I can understand why. End of story."
It was anything but. The embattled Mr Clegg, bruised by the row over tuition fees and exhausted after a rollercoaster year, was desperate for his Christmas break. But within seconds of leaving the press conference, officials broke more bad news. Mr Cable's unpublished remarks about Mr Murdoch had leaked to the BBC.
The night before, Mr Cameron and Mr Clegg had plotted their strategy for handling the first instalment of Mr Cable's remarks. Now they had to do it all over again. "The first part was embarrassing, but this was much more serious," one insider said last night.
The Prime Minister and his deputy hatched their plan for Mr Cable to keep his job but lose responsibility for media ownership. Their respective closest Cabinet allies – George Osborne, the Chancellor, and Danny Alexander, the Chief Treasury Secretary, were called to No 10 and backed the plan. Mr Cable was summoned to separate meetings with Mr Clegg and Mr Cameron. He accepted the deal.
The BBC claimed it had been leaked the anti-Murdoch comments by a whistleblower angry that the Telegraph was not going to publish them. Sources at the newspaper insisted it would have run the story, probably today. At the press conference, the Telegraph asked Mr Cameron whether he had confidence in Mr Cable.
Explainer: News Corp's bid for BSkyB
Doesn't News Corp own Sky already?
Only a 39 per cent stake. It wants to raise that to 100 per cent by buying out its fellow shareholders.
Why is that a problem?
Some people fear that once News Corp, with its stable of national newspapers, also has complete control of a major television company, it would be too powerful. It could cross-subsidise its papers, use Sky's entertainment package to give its online subscription deals an unfair advantage, or even compromise the editorial independence of Sky News.
Hasn't the European Union clearedthe deal?
Yes, but strictly on competition grounds. In the UK, regulators are also entitled to intervene in this sort of tie-up if they believe media plurality is threatened.
What does that mean?
That's the problem: it's a subjective judgement, rather than the sort of formula-based test the EU has applied. To block the takeover, you would have to be convinced that it was a real threat to the plurality of British media.
So who decides?
It was supposed to be the Secretary of State for Business, but the matter will now be settled by Jeremy Hunt, the Culture Secretary, instead. Vince Cable has already asked Ofcom, the media regulator, to advise on the potential plurality threat. It is due to make its report before the end of the year, at which stage Mr Hunt has to decide whether to refer the matter to the Competition Commission. It would then produce another report and Mr Hunt would make a final decision.
David Prosser, Business Editor
Did the Telegraph bury the story?
Despite the hundreds of times that Rupert Murdoch has sent his newspapers in to attack the BBC, it was the Corporation that put its business interests to one side yesterday to bring Vince Cable's remarks to public notice.
The Daily Telegraph had published a transcript of most of what the Business Secretary told its undercover reporters, but held back the part in which he talked about Rupert Murdoch and BSkyB.
Someone inside the newspaper leaked the missing section to the BBC's business editor, Robert Peston, who broke the story on air, despite the risk that it might improve Murdoch's chances of acquiring the 61 per cent of BSkyB that he does not already own.
In October, the heads of most of the major media organisations signed an open letter to Vince Cable, urging him to block Murdoch's plans, fearing that they could give him such a dominant position in the market that it would undermine competition.
Signatories included Murdoch MacLennan, chief executive of Telegraph newspapers, and Mark Thompson, director general of the BBC.
Being trumped by the BBC was embarrassing for The Daily Telegraph yesterday, though it denied that it had intended to suppress the Murdoch story permanently.
A spokesman said: "We have made clear both in the paper today and in interviews that we will be publishing further comments in the forthcoming days."