Culture secretary wrote memo to David Cameron supporting family's £8bn bid, despite being warned he should not intervene

Jeremy Hunt's grip on ministerial office looked increasingly precarious after the Leveson inquiry heard that he had written an outspoken memo for David Cameron, staunchly supporting the Murdoch family's £8bn bid for BSkyB, a month before he was handed the task of adjudicating on whether to approve the media merger in an apolitical, "quasi-judicial" manner.

The culture secretary also demanded that the prime minister intervene to rein in Vince Cable, who was at the time responsible for the BSkyB bid ? a request that explicitly contradicts a statement Hunt gave to parliament last month, in which he told MPs that he made "absolutely no interventions" to put pressure on the business secretary to wave the controversial takeover through.

It also raised fresh questions about the judgment of the prime minister and in particular his then cabinet secretary, Lord O'Donnell, who had ruled that Hunt would not prejudge the £8bn takeover even though he had publicly supported the bid. Cameron did not tell O'Donnell of the memo, but No 10 insisted the memo was "entirely consistent" with Hunt's previous public statements that the Murdoch's bid for BSkyB raised no media plurality issues.

The inquiry heard that the culture secretary drafted the email on his private Gmail account on 19 November 2010 despite being warned by his officials that he should not intervene because the decision was being taken exclusively by Cable. In the memo he voiced concern that Cable, the business secretary, had referred the takeover to media regulator Ofcom, warning him that James Murdoch was "pretty furious" and that the government "could end up in the wrong place in terms of media policy as a result".

Hunt wrote enthusiastically about the bid, saying Murdoch wanted to combine Sky television with the Sun and the Times to create a company spanning "from paper to web to TV to iPhone to iPad" and would revolutionise the media in the same way that James's father Rupert transformed newspapers by crushing the print unions at Wapping ? although there was widespread opposition to a takeover that would have brought the largest broadcaster and the largest newspaper group together.

The News Corp bid was opposed by the rest of Fleet Street, including the owners of the Daily Mail and the Daily Telegraph as well as the publishers of the Guardian and the Daily Mirror, and briefly by the BBC ? but in his memo Hunt chose to characterise the deal's opponents in nakedly political terms, saying: "I think it would be totally wrong to cave into the Mark Thompson/Channel 4/Guardian line."

At the time, formal responsibility for adjudicating on the bid rested with Cable, who was stripped of the role by Cameron in December 2010 after it emerged that he had been secretly recorded by two reporters working for the Daily Telegraph saying that he had declared "war on Murdoch". Cable was deemed unable to rule fairly on the bid in the light of his remarks.

In the memo Hunt also requested that Cameron organise a meeting with himself, Nick Clegg and Cable, who was refusing to meet Murdoch, "to discuss the policy issues that are thrown up as a result" ? although the sole legal responsibility for determining whether the bid should be approved rested with Cable. No such meeting took place.

Last month, however, Hunt denied to MPs that he sought to lobby against Cable. Speaking in the Commons Hunt said: "I made absolutely no interventions seeking to influence a quasi-judicial decision that was at that time the responsibility of the secretary of state for business. However, it is my responsibility to understand what is going on in the media industry and the impact of this very important sector, which employs thousands of people. That is why I was interested to find out what was going on."

It is a breach of the ministerial code to fail to tell the truth to parliament and the shadow culture secretary, Harriet Harman, said it was clear from evidence that Cameron gave responsibility to Hunt for ruling on the BSkyB bid when he knew only too well that the culture secretary was actively supporting it. "The prime minister should never have given him the job. It is clear Jeremy Hunt was not the impartial arbiter he was required to be, and he should already have resigned."

No 10 hit back, claiming: "Hunt's note is entirely consistent with his public statements on the BSkyB bid prior to taking on the quasi-judicial role. It also makes clear that 'it would be totally wrong for the government to get involved in a competition issue which has to be decided at arms length'. The PM has made clear throughout that he recused himself from decisions relating to BSkyB and did not seek to influence the process in any way."

Hunt was not himself at Leveson, which heard evidence from his former special adviser Adam Smith, who resigned last month after it emerged he had been in repeated contact with James Murdoch's chief lobbyist, Frédéric Michel, during the year-long bid approval process. The inquiry heard that Smith had been in contact with Michel more than 1,000 times by text, phone or email in the year after the Sky bid was launched in June 2010, with the two men sometimes speaking as often as four times a day. On one occasion Michel texted Hunt: "You were great at the Commons today" and Hunt replied: "Merci. Large drink tonight!"

Michel was repeatedly asked whether he thought that Smith was speaking for the minister. The inquiry counsel Robert Jay QC asked Michel: "You don't appear very willing to tell us, Mr Michel, whether Mr Hunt was supportive [of the Sky bid] or not ... or are you frankly not assisting us? Can we be clear?" Michel replied: "My view is that Jeremy Hunt was probably supportive of some of the arguments."

The Hunt memo was drafted by him and Smith to be sent to Cameron as part of a process of providing him with fortnightly political updates. Downing Street confirmed that Cameron received the memo dated four days after Hunt had a phone conversation with James Murdoch ? a telephone call that was necessary because the minister had been banned from meeting the media mogul by his permanent secretary Jonathan Stephens.

Downing Street was further embarrassed yesterday when it emerged that Cameron's press secretary Craig Oliver met Michel for a "discreet" dinner in July 2011 two days after the Guardian broke the story about the hacking of Milly Dowler's phone.

Draft of Jeremy Hunt's letter to David Cameron, November 2010

James Murdoch is pretty furious at Vince [Cable]'s referral to Ofcom [of News Corp's bid to take full control of BSkyB]. He doesn't think he will get a fair hearing from Ofcom. I am privately concerned about this because News Corp are very litigious and we could end up in the wrong place in terms of media policy. Essentially what James Murdoch wants to do is to repeat what his father did with the move to Wapping and create the world's first multi-platform media operator available from paper to web to TV to iPhone to iPad. Isn't this what all media companies have to do ultimately? ... we must be very careful that any attempt to block it is done on plurality grounds ...

The UK has the chance to lead the way on this as we did in the 80s with the Wapping move but if we block it our media sector will suffer for years ... I think it would be totally wrong to cave into the Mark Thompson/Channel 4/Guardian line that this represents a substantial change of control given that we all know Sky is controlled by News Corp now anyway... It would be totally wrong for the government to get involved in a competition issue which has to be decided at arm's length. However I do think you, I, Vince and [Nick Clegg] should meet to discuss the policy issues that are thrown up as a result.

Jeremy Hunt to MPs, 25 April 2012

I made absolutely no interventions seeking to influence a quasi-judicial decision that was at that time [Cable's] responsibility ... However, it is my responsibility to understand what is going on in the media industry and the impact of this very important sector, which employs thousands of people. That is why I was interested to find out what was going on.

Mohammed Morsi looks likely to go on to compete in run-off vote as Amr Moussa asks Mubarak's ex-PM to withdraw

Egypt's historic presidential election was on a knife edge early on Friday as first results pointed to a commanding performance by the Muslim Brotherhood candidate Mohammed Morsi, who is now likely to go on to compete in a runoff vote next month.

Morsi's apparent lead was trumpeted by the well-organised Islamist movement soon after the polls closed on the second day of the two-day vote ? the first time Egyptians have ever had a genuine choice of leader.

With fewer than 10% of the results declared, the overall outcome was still far too close to call. But the two leading contenders will fight a tense French-style second round on 16-17 June. If Morsi's position is confirmed, he will face either a rival independent Islamist or one of three other frontrunners.

Earlier, in a dramatic development, the former Arab League chief Amr Moussa moved to dominate the centre ground by calling on Ahmed Shafiq, Hosni Mubarak's last prime minister and his chief rival for the "stability" vote, to pull out.

"We need to build on the revolution and not go back to the days before it," Moussa told al-Arabiya TV. "I am calling on Shafiq to withdraw from the presidential race. I want to put a stop to his campaign if he wants to return to the past."

Shafiq, derided by critics as a discredited fuloul (remnant) of the Mubarak era, insisted he would not withdraw. Both candidates have been targeting millions of Egyptians who want an experienced politician regardless of their role under Mubarak.

Daytime temperatures soared into the mid-30s as Egyptians voted in the most important election of the Arab spring. Excitement was palpable as state media provided blanket coverage of a largely peaceful process and urged citizens to do their duty.

"The People regains its free will" and "Egyptians in the queue for democracy" were among newspaper headlines as the country's 51m-strong electorate enjoyed the extraordinary novelty of choosing a new leader without knowing the result in advance. Former US president Jimmy Carter, leading a monitoring mission, praised the conduct of the vote.

State TV broadcast pictures of General Sami Enan, the armed forces chief of staff, visiting polling stations and repeating the military's pledge to hand over power to a civilian president by the end of June.

"We are confident that Egypt's next president will be Mohammed Morsi," said Essam al-Arian, a senior Brotherhood official. "These elections are being followed not only by Egyptians and Arabs, but the entire world is waiting with bated breath for the results." Moussa's campaign office also put Morsi in the lead.

Analysts say one likely permutation is a runoff between Morsi and Abdel Moneim Abul Fotouh, the Brotherhood renegade and independent Islamist. In the past few days, there has also been a surge of support for Hamdeen Sabbahi, the independent Nasserist candidate.

"The runoff will be very intense whatever the permutation is," said Hani Shukrallah, the veteran commentator on al-Ahram newspaper. "And whoever gets elected will be walking into a minefield."

Only isolated incidents of low-level violence were reported. But the Egyptian Organisation for Human Rights recorded violations in the form of bribes being offered on behalf of Morsi, Shafiq, and Abul Fotouh. There were claims of votes being sold and, according to election monitors, a Morsi supporter distributed meat, sugar beans, lentils and oil to voters in Qena governorate.

Polling stations stayed open for an extra hour to boost turnout, apparently below the 60% mark achieved in parliamentary elections earlier this year. Counting was conducted at the stations in the presence of candidates' representatives, the media and NGOs to avoid the risk of fraud.

The result is only due to be announced officially next Tuesday, but Egyptian media was expecting to be able to report the outcome overnight based on computer data and statements by campaign representatives.

Voters admitted they faced tough choices. Hamada, a Cairo hairdresser, told al-Ahram he would vote for the "corrupt" Shafiq to protect his livelihood.

"We don't want an Islamic state, although we believe in the revolution. We need a force to counteract the Islamist-dominated parliament ? we need someone to secure our jobs, to allow our wives to walk in the streets and help us raise our children safely.

"I know he's a thief, corrupt and a liar but who isn't? The two Brotherhood candidates [Morsi and Abul Fotouh]? Of course not! And Sabbahi won't reach the second round. I'll lose my job if an Islamist becomes president because my job will be forbidden. Our revolution has been stolen."

Contraction of 0.3%, coupled with more bad news from the eurozone, increases pressure on government to intervene to boost economic growth

The prospect of fresh action to boost the flagging British economy loomed larger on Thursday after official figures showed a steeper fall in activity than previously thought and the crisis-hit eurozone drifted towards a deeper slump.

Labour seized on data from the Office for National Statistics (ONS) showing that gross domestic product declined by 0.3% in the first three months of 2012 as evidence that Britain is ill-prepared to withstand a deterioration in the rest of Europe over the coming months.

The ONS had originally pencilled in a 0.2% drop in output for the first quarter but said that the downturn in the UK's construction sector was even more pronounced than it had previously projected. Britain's economy was 0.1% smaller at the end of the three months to March than it was a year earlier, the ONS added.

A survey of business activity in the eurozone showed that the worsening of the debt crisis looks likely to have a marked impact on business activity. The purchasing managers' index ? a forward-looking guide to sentiment in the manufacturing and service sectors ? slid to a 35-month low of 45.9 in May, from 46.7 in April and 49.1 in March. Manufacturing was particularly weak, with activity contracting at the fastest rate for nearly three years while services activity shrank at the fastest rate for seven months.

Meanwhile, a key measure of German business confidence ? the Ifo index ? revealed that fears about the break-up of the single currency are starting to cast a shadow over Europe's biggest economy. Business confidence fell from 109.9 to 106.9, reversing all its gains of the past five months.

The shadow chancellor, Ed Balls, said: "It's now clear that this is a recession made in Downing Street by this government's failed policies. Despite all the problems in the euro area, France, Germany and the eurozone as a whole have so far avoided recession and only exports to other countries stopped us going into recession a year ago. The result is that Britain is now in a weaker position if things get worse in the eurozone in the coming months."

According to the ONS, the downturn in the first quarter was of the same magnitude as the contraction in the final quarter of 2011, undermining hopes that the economy was moving towards recovery.

Deputy prime minister Nick Clegg suggested earlier this week that the coalition plans to expand its policy of credit easing, using government guarantees to kickstart spending on infrastructure and housing to boost the economy. According to the ONS, construction output declined by 4.8% in the first three months of the year, after a 0.2% decline in the fourth quarter of 2011, helping to explain the government's change of heart about pumping fresh cash into building projects.

"Over the past 18 months, the economy has experienced a mild contraction in output. This reflects global economic headwinds as well as domestic economic conditions such as the impact of continuing high rates of inflation in the UK," the ONS said.

With the extra bank holiday for the Queen's diamond jubilee expected to depress economic output in the second quarter of the year, as workers down tools and fire up their barbecues, analysts believe it will be autumn at the earliest before the UK emerges from recession.

However, as Sir Mervyn King, the governor of the Bank of England, has stressed, events in the eurozone, where leaders are battling to contain the impact of the political paralysis in Greece, present a major risk to the outlook in the weeks ahead.

David Miles, the one member of the Bank's monetary policy committee (MPC) to vote for further quantitative easing this month, said: "No one on the MPC feels comfortable with the prolonged and substantial overshoot of inflation above its target level. But that does not mean bringing inflation back to target very rapidly is the best thing to do.

"In a situation where weak demand is likely to be having a negative impact upon productive capacity, the cost of having a tighter monetary policy to bring inflation back to target fast will be some long-lasting damage to incomes."

Howard Archer, of consultancy IHS Global Insight, described the growth figures as "very disappointing".

Senate committee votes to slash Pakistan's aid by $1m for each of the years Shakil Afridi, who ran fake CIA vaccine, is in prison

A US senate committee has voted to cut Pakistan's aid by $1m for each of the 33 years of a prison sentence given to a doctor for helping the CIA to track down Osama bin Laden.

The appropriations committee unanimously approved the $33m reduction as outrage grows in Washington over the conviction of Shakil Afridi for treason . The physician ran a fake vaccination programme in an attempt to collect Bin Laden's DNA in order to verify he was living in the Abbottabad compound where he was eventually killed a year ago.

The aid cut will not be immediately implemented as it comes out of next year's budget, but it will increase the pressure on the Pakistan government as Washington seeks to have Afridi's conviction quashed or his sentence substantially reduced.

The appropriations committee debate reflected the frustration at what many in Washington see as Pakistan's duplicity that has bubbled away for many years over the links between its intelligence service and the Taliban, and was accentuated when it was revealed that Bin Laden was living untouched in a garrison town.

"We need Pakistan. Pakistan needs us," said Senator Lindsey Graham, who helped write the legislation cutting aid. "But we don't need a Pakistan that is just double dealing."

Senator Dianne Feinstein voiced a repeatedly-heard sentiment on Capitol Hill since Afridi's conviction that it was outrageous to convict him of treason when he was helping not harming Pakistan by contributing to Bin Laden's demise.

"It was not a crime against Pakistan," she said. "It was an effort to locate and help bring to justice the world's No 1 terrorist."

Congressman Dana Rohrabacher demanded stronger action from the Obama administration. "Secretary Clinton will have to do more than voice protests over the Afridi case. Both the departments of state and defence need to take punitive actions against Pakistan.

"Carrots are not enough when dealing with an adversary. Sticks are needed to prove we are serious," he said.

Congressman Pete King, chairman of the House homeland security committee, has also blamed the Obama administration saying that it put Afridi "out there" by leaking details of his role in the raid to the media.

Administration officials say that information about the fake vaccination scheme, which was first reported in the Guardian, clearly came from the Pakistani authorities.

However, after Afridi's role was made public, US officials openly acknowledged it including the defence secretary, Leon Panetta ? who was CIA director when Bin Laden was killed? who described the doctor as having been "very helpful" in gathering intelligence on the al-Qaida leader.

The Senate appropriations committee has already slashed foreign aid to Pakistan from the $2bn proposed by Barack Obama to just $800m from October 1, in part because of across-the-board budget cuts, but also because of frustration with Pakistan. The additional $33m reduction will come from military aid. But it is likely to be restored if Afridi is released. The US has given Pakistan more than $18bn in aid since the 9/11 attacks.

Pakistan has pushed back, saying that the US should respect its courts. A foreign office spokesman, Moazzam Ahmad Khan, said that the case would be decided not by pressure from Washington but in accordance with the country's laws. "We need to respect each other's legal process," he said.

There is evidence that Afridi may not have realised he was being used to hunt Bin Laden. A retired Pakistani army brigadier, Shaukat Qadir, who obtained access to intelligence reports about Afridi's interrogation said that he may not have known he was helping track down Bin Laden.

"Shakil [Afridi] had no idea of whom or what he was looking for. He was merely paid to follow instructions," Qadir wrote in a report. It is not clear if Afridi knew he was working for the CIA. Qadir's report may explain why Afridi did not immediately leave Pakistan after Bin Laden was killed.

Afridi, who was convicted by a tribal court in northwest Pakistan, is being held at the Central Prison in Peshawar where he is said by Pakistani officials to be "weak and depressed".

Last-ditch agreement reached in Baghdad to make another attempt at a compromise deal in Moscow next month

International talks over Iran's nuclear programme were salvaged from collapse in Baghdad with a last-ditch agreement to make another attempt at a compromise deal in Moscow next month.

After two days of intense talks in the Iraqi capital, Lady Ashton, the EU foreign policy chief, said: "It is clear that we both want to make progress, and that there is some common ground. However, significant differences remain. Nonetheless, we do agree on the need for further discussion to expand that common ground."

The common ground seems limited, beyond the desire to keep talks going to forestall the threat of Israeli military action. Ashton pointed to Iran's "readiness to address the issue of 20% enrichment" ? a particular concern for the international community as 20%-enriched uranium is easier to convert into weapons-grade material. But diplomats at the talks said Iran's lead negotiator, Saeed Jalili, did not explicitly offer to curb 20% enrichment.

"It wasn't easy," one diplomat said. "Jalili said he was prepared to talk about 20% enrichment but then he came up with a bunch of peripheral issues like relations with Bahrain, and events in Syria."

After the talks, Jalili told CNN that progress at Moscow would require that "measures that damage the confidence of Iranians should be avoided", an apparent reference to punitive measures such as sanctions.

Responding to the mixed outcome of the talks, the foreign secretary, William Hague, said Iran needed to take "urgent, concrete steps". He added: "If Iran fails to respond in a serious manner, they should be in no doubt that we will intensify the pressure from sanctions, including the embargo on oil imports already agreed, and will urge other nations to do the same."

The UK remained fully committed to a diplomatic solution to the nuclear impasse, he said, but added "we must see significant progress from Iran" in Moscow.

At the outset of the talks, a six-nation group of senior diplomats presented what they termed a confidence-building package, calling on Iran to stop 20% enrichment, ship all its 20% uranium out of the country and stop operations at its underground enrichment plant at Fordow.

In return, the group ? the US, UK, Russia, France, Germany and China ? offered nuclear fuel plates for a research reactor, help with nuclear safety at Iranian reactors and spare parts for Iran's commercial airliners.

Jalili verbally presented counter-proposals, but they were considerably more vague. First was what he termed "the operationalisation of the fatwa", a reference to supreme leader Ali Khamenei's reported religious edict outlawing the development of nuclear weapons, although it was not clear how this would be put into effect.

His second point was international recognition of Iran's right to enrich uranium, and the third point dealt with regional issues like Bahrain and Syria.

Western diplomats argued that Iran's right to enrich uranium as part of a complete nuclear fuel cycle had been suspended until Tehran could convince the international community it had entirely peaceful intentions for its programme. The six-nation group argued that such issues would ultimately be addressed in a comprehensive settlement of the Iranian nuclear stand-off, but that the two sides should first carry out smaller, confidence-building steps.

Iranian state media reports criticised the package offered to Tehran on the grounds it did not include immediate relief from sanctions, but European diplomats claimed Jalili hardly mentioned sanctions inside the meeting "because he knew he would get no traction".

As evening fell on the second night of talks, Jalili's delegation was threatening to end the negotiations without agreement on a time and venue for a further round, which would have signalled a breach in the tenuous diplomatic process begun in Istanbul last month, and a ratcheting up in tensions in the Gulf once more.

Ashton, and the Russian and Chinese delegations held separate meetings with the Iranian negotiator in the late afternoon to persuade him to agree to a further round in Moscow on June 18. His agreement was only evident in the dying minutes of the last plenary meeting.

Western diplomats conceded that less had been achieved than had been hoped, but claimed that the Baghdad meeting had met the minimum goal set by the six-nation group, of marking the start of the first serious and detailed negotiations about Iran's nuclear programme since January 2011.

A US negotiator said: "We are getting to the things that matter ? this is at least the beginning of a negotiation."

European diplomats said that the threshold for the Moscow talks would be substantially higher and that failure to reach a compromise there would have to be counted as a failure. "This cannot continue like this," one diplomat said. "The pace will get faster and the benchmark will get higher."