Andrew Grice: Relations between the PM's two closest aides 'go from bad to worse'

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Relations between David Cameron's two closest aides are said to have reached a new low as they battle for the Prime Minister's ear and one of them fights to keep his Downing Street post.

Andy Coulson, the director of communications at No 10, is under a cloud because of the allegations over the hacking of celebrities' telephones, which forced him to resign as editor of the News of the World in 2007. He retains the support of Mr Cameron and the Chancellor George Osborne as well as his own ultra-loyal band of press officers, who insist that, despite an endless stream of revelations about the affair, no evidence has emerged that he knew about phone hacking by his reporters.

Whispering in Mr Cameron's left ear is Mr Coulson's rival Steve Hilton, the Prime Minister's director of strategy. His allies wonder whether Mr Coulson should quit to limit the damage the hacking controversy is causing the Government. "It is making it difficult for the No 10 machine to function properly," one claimed.

Mr Coulson and Mr Hilton are described by colleagues as "chalk and cheese". Mr Coulson is the "Essex boy" who started as a local newspaper reporter in Basildon before becoming a show-business reporter on The Sun, a sharp-suited strategist who frets about the next day's headlines, especially in the Daily Mail and The Sun.

Mr Hilton raises eyebrows among Downing Street civil servants by wandering around in his socks. He is "California man" who spent six months in the state before last year's election, while his wife Rachel Whetstone worked there for Google. He epitomises Google's open, liberal values and wants the power of the internet to revolutionise government, while Mr Coulson retains his close links with Rupert Murdoch's News Corporation, which is building a paywall for its newspapers' websites.

Mr Hilton tells Mr Cameron to worry less about tomorrow's headlines and focus on his long-term vision. He argues that the Justice Secretary Kenneth Clarke's "rehabilitation revolution" in prisons will work by 2015, while Mr Coulson worries about tabloid headlines on "soft" sentences and being outflanked by Labour on law and order.

As a liberal Conservative before it was in fashion, Mr Hilton is at ease with the Coalition and is less of a tribal Tory than Mr Coulson. Mr Hilton is the architect of the "big society" and a passionate advocate of devolving power to the lowest possible level. He supports initiatives such as the "happiness index", "nudging" people into changing their behaviour and "responsibility deals" to encourage business to have a social conscience. Allies of Mr Coulson believe that agenda to be too vague, saying the "big society" failed to capture the imagination at last year's election. Friends of Mr Hilton reply to that by blaming the Tories' failure to win an overall majority on the ill-fated decision to agree to Britain's first televised election debates. And whose call was that? Mr Coulson's.

Admirers of Mr Coulson query Mr Hilton's judgment, claiming he goes "through the back door" to re-open decisions by appealing directly to Mr Cameron.

One source, referring to the allegations against the News of the World, said: "Steve and Andy have never been close. Relations have gone from bad to worse because of recent events."

Friends of both men dismiss as a caricature the idea that the battle between them is about rival egos. They insist that Mr Cameron likes to get views from different standpoints before making up his mind.

Insiders admit that there is a debate about Mr Coulson's future at Downing Street which has intensified since last week's announcement that the Crown Prosecution Service is to review all evidence in the phone-hacking case.

But Mr Coulson is resilient and some friends believe he will stay the course until the 2015 election.

Despite that, rumours swirl around Westminster and Whitehall that Mr Coulson might depart this spring, insisting that he always intended to serve only a year in government. The trouble is that people would assume he was going because of the phone-hacking row – so he may be at Mr Cameron's side for a while yet.



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