The Chancellor, George Osborne, is facing questions over whether he played a role in supporting News Corp's attempted £8bn takeover of BSkyB.
Evidence has emerged at the Leveson Inquiry that Mr Osborne was lobbied personally by James Murdoch and that Rupert Harrison, the Chancellor's special adviser, discussed the bid with Frederic Michel, News Corp's public affairs director.
In a written submission, Mr Murdoch said that he discussed the bid with Mr Osborne in November 2010, when News Corp's attempt to buy the 61 per cent stake in BSkyB it did not own was being considered by Vince Cable, the Liberal Democrat Business Secretary. Mr Murdoch said: "I believe we discussed a number of matters, and that I expressed my concern at the slow progress with the regulatory process, my view that the investment would be good for Britain and also my view that there were no plurality issues raised by our proposal."
Questioned at the inquiry, Mr Murdoch said of the meeting: "Nothing I would have said to Mr Osborne would have been in any way inconsistent with our public advocacy on the subject."He described his relationship with Mr Osborne as "friendly" but said he was not "a close friend". He disclosed that he had visited the Chancellor's country residence at Dorneywood with his family.
In an email to Mr Murdoch, his lobbyist Mr Michel described a meeting with Mr Harrison, one of the Chancellor's closest and most influential advisers. Mr Michel claimed Mr Harrison "confirmed tensions in the Coalition around Cable... Rupert and I will have an ongoing dialogue in the weeks to come."
A Treasury source said last night: "The account of the meeting with Mr Harrison is exaggerated. Mr Harrison was not involved in the process and knew nothing about it. He was not referring to Mr Cable's position on the BSkyB bid but the general policy position. He has no recollection of any further contact with Mr Michel."
Whitehall sources have told The Independent that the Chancellor was sympathetic to News Corp's bid and claimed he was lobbied because Mr Murdoch feared that Mr Cable was not. The sources claimed that when Mr Cable was stripped of responsibility for the bid after telling undercover reporters he had "declared war" on Rupert Murdoch, Mr Osborne was keen for the job to be handed to Jeremy Hunt, the Culture Secretary. "It could have gone to a more neutral figure like Kenneth Clarke," said one government source. "Instead we went from one end of the spectrum to the other."
But the Treasury source insisted: "That was a decision for the Prime Minister and Cabinet Secretary. The Chancellor was not involved."
It is unclear whether Mr Osborne will be called to give evidence by Lord Justice Leveson. David Cameron and Mr Hunt are due to appear next month.