Bloomberg News

Cameron Hit by Ex-Aide’s Arrest Over Phone-Hacking Scandal

July 08, 2011

(Updates with poll details starting in eighth paragraph, comment in 12th.)

July 8 (Bloomberg) -- The arrest of Andy Coulson, David Cameron’s head of communications until January, risks tainting the prime minister’s government, already facing mounting opposition over the deepest budget cuts since World War II.

Police in London arrested Coulson today, a person familiar with the matter said, a day after the newspaper he once ran was closed by News Corp. following allegations of widespread phone- hacking in the pursuit of stories. Coulson, who was News of the World editor from 2003 to 2007, has said he knew nothing of illegal activities during his tenure and that wrongdoing was confined to one rogue reporter.

Trailing in the opinion polls, Cameron is being forced to defend his 2007 decision to hire Coulson just as labor unions threaten to derail his austerity agenda with a wave of strikes. The prime minister also faced questions today about his ties to James Murdoch, deputy chief operating officer of News Corp., and his father, Rupert, whose newspapers have shaped the British media landscape for four decades.

“It’s a Cameron issue. This is now about him,” Steven Fielding, director of the Centre for British Politics at Nottingham University, said in an interview. “The danger is that this comes to define him in the public mind. Then it becomes the characteristic through which everything he does is viewed.”

Takeover Review

A looming hurdle for Cameron is his government’s decision on whether to allow News Corp. to buy the 61 percent of British Sky Broadcasting Group Plc that it doesn’t already own.

He and Culture Secretary Jeremy Hunt have said that a decision can only be made on the 7.8 billion-pound ($12.5 billion) takeover bid on the grounds of media plurality,

The Department for Culture, Media and Sport said today it anticipates it will take “some time” to consider all the 156,000 submissions it received on the takeover bid. The Department for Business said last month it usually receives between 10 and 15 interventions in such cases.

Cameron’s Conservative Party trailed the opposition Labour Party by 37 percent to 43 percent in a YouGov Plc poll conducted July 6 and 7. YouGov questioned 2,759 people in its regular poll for The Sun, another News Corp. newspaper. No margin of error was given. If replicated in an election, that would give Labour a majority in the House of Commons, according to standard calculations.

Views on Leaders

Labour is leading in the polls even though voters think its leader, Ed Miliband, is doing a worse job than Cameron. The latest YouGov data show 60 percent of respondents say Miliband is performing badly, with 26 percent saying he’s doing a good job. Fifty-two percent of voters have a negative view of Cameron, though 42 percent say the premier is working well.

Politicians have long courted the support of Murdoch, 80, an Australian-born U.S. citizen whose runs his media empire from New York while owning four British national newspapers.

The Sun has backed the winner in every election since 1979, when it supported Margaret Thatcher. It switched its support from Conservative Prime Minister John Major to Labour’s Tony Blair before the 1997 election, then transferred its backing to Cameron in last year’s vote.

“The thing is that politicians don’t have the confidence to cross him,” said Philip Cowley, professor of politics at Nottingham University. “Thatcher, Major, Blair, Brown and Cameron all courted him, with varying degrees of success.”

‘Became a Friend’

Cameron’s immediate difficulty is his relationship with Coulson, his highest-paid aide for 3 1/2 years.

Cameron told a press conference in London today that Coulson “became a friend and is a friend,” and said they remain in touch. Explaining his decision to hire him, he said he believed that the initial police investigation of the News of the World in 2006 had cleared Coulson of knowledge of the affair.

“I decided to give him a second chance,” he said. “But the second chance didn’t work out. People will judge me for that, I understand.”

There was little public clamor over Coulson’s role when the phone-hacking revelations were limited to the phones of celebrities and politicians.

Milly Dowler

That changed on July 4 with the report that the News of the World had in 2002, when Rebekah Brooks was editor and Coulson her deputy, hacked into the phone of murdered schoolgirl Milly Dowler and deleted voicemail messages, misleading her parents into thinking she might be alive and complicating the police inquiry into her disappearance. Brooks is now chief executive officer of News International, News Corp.’s U.K. publishing division.

Two days later News International confirmed it had passed e-mails to detectives that showed evidence of payments to police officers. The BBC reported that they implicated Coulson.

James Murdoch, 38, cut the entire newspaper loose yesterday, closing it down and admitting that executives in the company had misled Parliament and that he himself had been wrong to approve out-of-court payments to phone-hacking victims that included non-disclosure agreements.

Cameron said today he had sought “specific assurances” from Coulson before he hired him and had had further conversations with him after reports that hacking had been widespread broke in 2009.

‘Untouchable’

“Perhaps he thought that News International was such a powerful organization that Coulson was untouchable,” Tim Bale, author of “The Conservative Party From Thatcher to Cameron” and professor of politics at Sussex University, said in an interview. “Cameron is normally very good at damage limitation. Now he’s just caught completely.”

Part of the appeal of Coulson to Cameron in 2007 was his connection to Murdoch.

According to Parliament’s register of interests, Rupert Murdoch’s son-in-law, Matthew Freud, the founder of public relations firm Freud Communications, flew Cameron and his family to Greece in August 2008. There Cameron, then the Conservative opposition leader, joined Murdoch for drinks aboard his yacht, the Daily Mail newspaper reported.

Brooks lives near Cameron in his Oxfordshire electoral district, and they have dined together. He attended her wedding. The Sun and the Times endorsed Cameron in last year’s general election, having backed Labour under Tony Blair from 1997 to 2005.

Ozzy Osborne

Other top politicians have been no less close to the Murdochs. On Chancellor of the Exchequer George Osborne’s desk in 11 Downing Street, there’s a mocked-up front page of The Sun, given to him in May to celebrate his 40th birthday. Under the headline “Ozzy Was Born,” the chancellor’s face has been grafted onto a picture of the Black Sabbath singer, Ozzy Osbourne.

Miliband, who attended Rupert Murdoch’s summer drinks recently, has already decided to go on the offensive against News Corp. He told the BBC today he was “disappointed that the prime minister didn’t respond to the clear public outrage that there is.”

Cameron told reporters today that in the past, he and other party leaders “were so keen to win the support of newspapers that we turned a blind eye. The relationship needs to be different in future.”

Cameron may need to do more to convince voters.

“If he can get out of this one without being damaged in a serious way, he’s the king of spin,” said Fielding.

Bloomberg LP, the parent of Bloomberg News, competes with News Corp. units in providing financial news and information.

--Editors: Eddie Buckle, James Hertling.

To contact the reporter on this story: Robert Hutton in London at rhutton1@bloomberg.net.

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net.


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