Andy Coulson, former Conservative party director of communications, leaving 10 Downing Street in January. Photograph: Carl De Souza/AFP/Getty Images
The Conservative party is struggling to defend itself against the disclosure that Andy Coulson, its former head of communications, received six-figure payments from News International while working for the party, despite having previously stated categorically that he had no other income.
The party has been asked repeatedly about Coulson's income, insisting that he was not paid by anyone else during his time at Conservative party HQ and in Downing Street. It offered comprehensive assurances that he had no other income as recently as last month, and apparently after seeking assurances directly from Coulson.
The revelation on Monday night that he received the severance payments in instalments in 2007, the first year he was employed by George Osborne and David Cameron, and also continued to use a company car and receive health insurance from News International until the beginning of 2010, raises the possibility that the payments could have been concealed from the party.
But in a sign of the continued loyalty to Coulson at the top of the government, senior sources in the Conservative party stressed that the severance payments were different from receiving a salary or co-payment from News International. The party refused to answer detailed questions about what assurances Coulson gave about his earnings, whom he had given assurances to, and when.
No 10 directed inquirers about the revelations to the prime minister's previous promise in the Commons to issue a "profound" apology should it transpire that Coulson lied to him over the extent of his knowledge of phone hacking at the News of the World, where he was editor before joining the Conservatives. But the Opposition and even some people within the coalition demanded to know whether Coulson had lied about his income too.
Lord Oakeshott, the Liberal Democrat peer, said: "There is a clear conflict of interest in the director of communications for the Conservative party driving a company car and using health insurance provided by News International. Clearly he didn't come clean on this with the party. Have we got to the bottom of it even now?
"The question is: did Andy Coulson conceal this from the Conservative party or not? If he didn't, who knew? This raises ever more serious questions and, rather than having to drag admissions out of them one at a time like rotten teeth, we need Cameron to say what he knew."
Ivan Lewis, Labour's culture spokesman, said: "It must be explained why Mr Coulson was getting these payments when he resigned from the News of the World. The longer these questions are unanswered the more damage will be done to the prime minister's reputation."
Tom Watson, the Labour MP who has campaigned on phone hacking, wrote to the Electoral Commission asking it to investigate the payments, arguing they could amount to an undeclared donation to the Tory party. The commission's rules suggest that a decision to investigate will rest on whether Coulson's payments benefited the party or amounted to a gift in kind that saved the party expenditure, for example by meaning it did not have to provide health insurance, which is not routinely offered at Conservative Campaign HeadquartersCCHQ.
In a statement, a spokesman for the party said: "We were not aware until last night of allegations that Andy Coulson's severance package, agreed with News International before he was employed by the Conservative party, was paid in instalments that continued into the time he was employed by the Conservative party. Any payments made to Andy Coulson as part of his severance package with News International would not constitute donations in kind to the party as they were linked to his previous employment with NI, not with the Conservative party. Severance payments are a private matter. It is not part of the HR process to discuss severance payments from previous jobs with potential employees."
Last month, a senior Conservative official told the Guardian: "We can give categorical assurances that he wasn't paid by any other source. Andy Coulson's only salary, his only form of income, came from the party during the years he worked for the party and in government."
The Guardian has also established that News International paid Coulson's legal fees up until late last year while he was still working in Downing Street.
The Cabinet Office confirmed last year that Coulson's legal fees were met by News International when the former MSP Tommy Sheridan was prosecuted for libel in December 2010. News International would not be drawn on whether Coulson's legal fees are still being paid by the company. According to insiders, however, some so-called compromise agreements signed by former staff include clauses stating that the company will meet the cost of any future legal disputes relating to their time at the company.
Two former News International editors, David Yelland and Andrew Neil, publicly disputed claims that staggered severance payments were normal at the firm.
Senior News International sources privately claimed Coulson was entitled to have his contract honoured despite having resigned from the paper in January 2007 after his royal editor was jailed for intercepting voicemails. However, Yelland, a former Sun editor, said on Twitter: "When I left NewsCorp I didn't sign or have any compromise agreement! I just left." It is understood that Yelland did not receive any money from the company. Neil, who edited the Sunday Times for 10 years, used Twitter to say: "My original NI editor contract said if I resigned I was entitled to nothing."
A spokesman for Rebekah Brooks, who resigned as chief executive of News International last month, refused to comment on whether she has received a pay-off from the company, or whether any sum agreed is being paid in instalments.
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