Osborne: The Machiavellian Macavity

He wooed Andy Coulson and he made the checks. He, too, is close to Rebekah Brooks. He is the Tory party's orchestrator behind the scenes and, it is increasingly clear, a major source of David Cameron's recent travails. George Osborne is the vital voice that Lord Leveson must hear – but he has not yet been asked to appear at the inquiry

In the sprawling story of how Rupert Murdoch's reach into David Cameron's inner circle is infecting the Government, there is one man whose role has been pivotal: George Osborne.

When Rebekah Brooks was lobbying on behalf of her boss, Mr Murdoch, for the Government to give the green light to his takeover of BSkyB, it was the Chancellor, not the Prime Minister, who listened as she set out her case.

When Mr Cameron was searching for a new communications director to help his party win the election, it was Mr Osborne who went hunting for Andy Coulson – and who was responsible for checking out what the ex-News of the World chief knew when about phone-hacking.

And when Mrs Brooks and her husband enjoyed a sleepover at one of the Government's grand official residences, it was at Dorneywood, the Chancellor's Buckinghamshire mansion, that she unpacked her overnight bag.

Yet, despite the leading part he has played in the saga, and despite being among eight cabinet ministers who have access to documents and evidence given to the inquiry, the Chancellor is the only one of these so-called core participants yet to be called to give evidence in Court 73 of the Royal Courts of Justice on the Strand.

The Prime Minister, Culture Secretary Jeremy Hunt and Michael Gove, the Education Secretary, who is a long-standing friend of the Murdoch family, will all appear, along with Vince Cable, the Business Secretary who wanted to declare war on Mr Murdoch.

Even Nick Clegg, the Deputy Prime Minister, who had a peripheral role in the Government's handling of Murdoch's bid for BSkyB, will take a seat under the gaze of Lord Leveson and Robert Jay QC, counsel for the inquiry.

But Mr Osborne, who is so far obliged only to give written evidence, will remain in No 11, something of a modern-day Machiavellian Macavity, orchestrating behind the scenes – increasingly, with the debacle of the Budget and the mess over Mr Coulson, to the detriment of Mr Cameron's reputation.

Mr Osborne used to ridicule his opposite number Gordon Brown for being a "Macavity", T S Eliot's mysterious feline never found at the scene of a crime. He meant, of course, that Mr Brown was always plotting but never left behind his fingerprints.

Mr Osborne's approach to Mr Coulson to be director of communications for the Conservative Party in 2007, just two months after the former had resigned as editor of the News of the World, is well established. What is less known is that Mr Osborne – whose picture had been splashed across Mr Coulson's paper two years earlier under the headline "Top Tory, coke and the hooker" – was so eager to get the ex-editor on board he apparently persuaded Mr Cameron to back down on demands for Mr Coulson to sign a confidentiality agreement. According to an updated biography of the Prime Minister, by The Independent on Sunday's James Hanning and Francis Elliott of The Times, Mr Coulson refused to sign any such agreement, and Mr Osborne, who was brokering the appointment, did not insist on it. In fact, as Lord Leveson heard last week, only the most cursory of checks were made of Mr Coulson.

The former editor's appointment was brokered by Mr Osborne, but it has been alleged – although denied by Mrs Brooks – that she persuaded him to propose it. Much has been made of Mr Cameron's friendship with Mrs Brooks – including their "LOL" texts – but her connection to Mr Osborne is surely as crucial.

Mr Murdoch Snr is also an admirer of the Chancellor. A source says: "When David Cameron and George Osborne were in a meeting with Rupert Murdoch, it would tend to be George that Rupert would pay most attention to."

Official Treasury documents show that Mr Osborne met Mrs Brooks five times in his first year as Chancellor, including a "social" occasion in September 2010. At the time, News Corp was stepping up its campaign to take over BSkyB. But the word "social" does not tell the full story: this was, in fact, a weekend stay by Mrs Brooks and her husband at Dorneywood, along with Mr Coulson and his wife.

While Mr Cameron has made great play of the "pyjama party" that Gordon and Sarah Brown held at Chequers for Mrs Brooks, among others, the Prime Minister and Chancellor have been reticent about the Dorneywood sleepover.

Treasury officials denied last night that the failure to include the word "Dorneywood" in the entry for the "social" meeting meant that the weekend stay had been hidden – even though the Prime Minister has listed all his engagements with senior media executives at Chequers.

Yet the Chancellor's "pyjama party" with the Brookses and Coulsons, at a time of acute sensitivity during the BSkyB bid, will raise eyebrows.

The generosity has not always been one way. Mr Osborne keeps a spoof front page of The Sun, commissioned by Mrs Brooks for his 40th birthday, showing his date of birth and the headline "Ozzy was born" in his office.

Mrs Brooks shed light on her closeness to the Chancellor in her evidence to the inquiry on Friday. While the texts between her and Mr Cameron were illuminating, a potentially more damaging disclosure was her meeting with Mr Osborne in December 2010, during which she lobbied him over the BSkyB bid. She told Lord Leveson that Mr Cameron refused to discuss the bid with her – "he always made it very clear that it was... a quasi-judicial decision and it wasn't him and it was off his remit". The Prime Minister was "not particularly" supportive of the bid, she told the inquiry. But it seemed that Mr Osborne was more willing to listen. At the lunch meeting in December 2010, Mrs Brooks "put my views that were contrary to the ones that he had heard from everyone else".

Mrs Brooks told the inquiry she couldn't tell whether the Chancellor was supportive of the bid, but said: "He was interested in our arguments. I think that's probably at its best."

Later this month, Lord Leveson will hear from Jeremy Hunt about his role in the BSkyB bid and his closeness to the Murdoch empire, and he, for now, is the cabinet minister who is in the inquiry's spotlight.

Mr Hunt's position was not helped by an email, disclosed by Mrs Brooks on Friday, that showed the News Corp lobbyist Fred Michel claiming that the Culture Secretary had asked the media giant to "guide" him and No 10 on phone hacking. Mr Hunt has to wait another two weeks before he can put his side of the story. It was pointed out by one party Kremlinologist that the disclosure of this new email can only help Mr Osborne's leadership ambitions. Party insiders say that the Chancellor used to resent talk that Mr Hunt was a potential successor to David Cameron, and is privately enjoying the Culture Secretary's discomfort. How delighted he must have been, they say, that his old friend Mrs Brooks was helping to knife Mr Hunt?

A friend of Mr Hunt sighed last week: "Poor Jeremy. Westminster is full of snakes and ladders, and he's finding out there are more snakes than there are ladders."

But how long can Mr Osborne sustain his position as the Machiavellian Macavity? Mr Cameron – who once said privately he would be ready to fire his closest friends – must find that his relationship with his Chancellor is severely tested.

Many of his problems can be traced back to Mr Osborne. In opposition, George was the author of the Yachtgate fiasco. He is blamed by many Tory MPs for failing to secure an outright victory for the party in 2010. The Government's current run of bad luck started with his much-derided Budget. It was compounded by the confirmation last month that the UK has hit a double-dip recession.

But it is Mr Osborne's part in the Murdoch saga that could be the most damaging for the Prime Minister. It is one that should, surely, be aired in public in Court 73.

Additional reporting by Charles Engwell

Rebekah's selective memory disorder

Trunk call She denied swimming with Rupert Murdoch in London, but told his biographer Michael Woolf that Murdoch had once challenged her to a swimming race off his yacht; she had agreed to give up smoking if she lost. Murdoch won.

Doubtful dinner In her declaration of her meetings with David Cameron, Rebekah Brooks forgot to mention a dinner held by Matthew Freud for David Cameron and George Osborne a few days after Cameron won the Tory leadership in 2005.

What yacht? She was unable to recall how Cameron happened to be in Santorini on Rupert Murdoch's boat in 2008, when the media was full of the fact that PR svengali Matthew Freud had flown the Tory leader to meet Murdoch on his boat.

Digital doyenne Part of the reason she wanted to stop editing The Sun to become chief executive of News International in June 2009 was "the digital age and the iPad and the paywalls, they were all of interest to me". The first iPad did not go on sale until April 2010.

Festive friends She says she "popped in" to her sister-in-law's mulled wine and mince pie drinks party on Boxing Day 2010 but can't remember if she spoke to the PM. The IoS, which was represented at the party, can help. Our source "saw them talking together later in the evening".

Dark rumour She denies having asked the gay Labour MP Chris Bryant "Shouldn't you be on Clapham Common?" Bryant says he is "absolutely certain" she said it, and has witnesses.

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