George Osborne's closest political aide secretly gave News Corp information about the likely contents of the Government's first budget, it was revealed last night.
Email correspondence, released by the Leveson Inquiry, shows that Mr Osborne's most senior political adviser in the Treasury, Rupert Harrison, sent Fred Michel a message all but confirming that the Government was not intending to introduce VAT on newspapers.
As one of the largest publishers in the country, News International (owned by News Corp) had a key interest in ensuring that extending VAT to newspaper sales was not included in Mr Osborne's plans to help pay off the deficit.
In the email, sent just four days before Mr Osborne stood up to deliver his budget, Mr Harrison writes: "Would be good to meet up after the Budget. Obviously I can't really comment on budget policy decisions now, but I would just point out we have said nothing over the last few weeks or months that would suggest any extension of VAT."
The message is one of a number of emails and text exchanges between the men which were recovered from Mr Michel's phone.
The messages also reveal that Mr Michel tried to get Mr Osborne to intervene on News Corp's behalf to lobby Vince Cable to approve the bid.
One sent on 9 November said: "Rupert, just spoke with James (Murdoch). It would be helpful if George were to send a letter to Vince on our Sky merger and its economic importance, separate from the Ofcom process. Do you think it is a possibility? I can of course help with the content."
Mr Harrison replied: "will have to discuss it with G when he's back from China." It is not yet known if Mr Osborne did intervene on News Corp's behalf.
Mr Michel also asked Mr Harrison why Danny Alexander, the Chief Secretary to the Treasury, had refused to meet James Murdoch. Mr Harrison replies: "Will try to find out in a roundabout way, but as you know they can be an unpredictable bunch..." Mr Michel retorts: "Indeed mon ami!"
Mr Michel also offers corporate hospitality to Mr Harrison, writing: "I am hosting a box at Wembley on 4th July for the Take That reunion concert! Just 10 people. James Harding is coming. Would you like to join us?" However, Mr Harrison did not reply in time.