Cameron knew Hunt would back BSkyB bid

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Devastating memo shown to Leveson Inquiry puts PM in line of fire

The political scandal over Rupert Murdoch's battle to buy BSkyB moved closer to David Cameron last night after new evidence undermined the Prime Minister's claim that his Government was scrupulously even-handed in deciding on the £8bn deal.

A damning memo, released by the Leveson Inquiry, revealed for the first time that Mr Cameron already knew his Culture Secretary Jeremy Hunt was in favour of the bid, before he handed him quasi-judicial power to rule on it.

In the private message to the Prime Minister, Mr Hunt told Mr Cameron of James Murdoch's fury at his treatment, and stressed the importance of the deal going through. Only a month later, and despite knowing Mr Hunt's views, Mr Cameron handed him responsibility for making the decision on the bid. At the time he was under pressure from the Liberal Democrats to hand the decision over to a more impartial figure, such as the Justice Secretary Ken Clarke.

Importantly, the memo was also never seen by the then Cabinet Secretary Gus O'Donnell, who later assured critics that Mr Hunt's past statements did "not amount to a pre-judgement of the case in question". Mr Cameron has previously said he had "nothing to do" with the specifics of the bid, and is now likely to be questioned on this when he appears before the inquiry.

In a day of new revelations at the Leveson Inquiry, which heard evidence from both Mr Hunt's special adviser Adam Smith and the News Corp lobbyist Fréd Michel, it emerged that:

* Mr Hunt may have misled Parliament over a statement he made claiming he had had no contact with Mr Michel other than official meetings. Messages released by the inquiry revealed he had texted him on at least three occasions, including one which read: "When consultation over we can have coffee like the old days."

* More than 1,000 text messages were exchanged between News Corp and the Department for Culture, Media and Sport during the bid process, including 257 from Mr Smith to Mr Michel.

* Mr Michel admitted Mr Smith had given him regular updates on the "timings" and "process" of the bid, but said this did not amount to a "running commentary" of the Government's thinking.

But the most damaging revelation was the emergence of the memo from Mr Hunt to the Prime Minister on 19 November 2010, in which he made clear his support for the Murdoch empire's ambition to take full control of BSkyB. It also suggests Mr Hunt was aware News Corp was plotting a "Wapping mark 2" by uniting UK print, internet and TV interests – potentially fatally undermining its competitors. In it he wrote: "Essentially what James Murdoch wants to do is to repeat what his father did with the move to Wapping and create the world's first multiplatform media operator available from paper to web to TV to iPhone to iPad."

He added: "It would be totally wrong to cave into the Mark Thompson [BBC Director General]/Channel 4/Guardian line that this represents a substantial change of control given that we all know Sky is controlled by News Corp now anyway."

Last night Downing Street pointed out that Mr Hunt had previously made clear in public that in principle he had no problem with the bid. "Jeremy Hunt's note is entirely consistent with his public statements on the BSkyB bid prior to taking on the quasi-judicial role," said a spokesman. "It also makes clear that 'it would be totally wrong for the Government to get involved in a competition issue which has to be decided at arm's length'. The PM has made clear throughout that he recused himself from decisions relating to BSkyB and did not seek to influence the process in any way."

However, Labour said that by trying to arrange a meeting to discuss the bid, Mr Hunt had undermined his assertion in the Commons that: "I made absolutely no interventions seeking to influence a quasi-judicial decision that was at that time the responsibility of the Secretary of State for Business." This was denied by sources close to the Culture Secretary. Harriet Harman, Labour's deputy leader, said: "It is clear... that David Cameron gave responsibility to Jeremy Hunt for deciding on the BSkyB bid when he knew only too well that the Culture Secretary was actively supporting the bid."

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