News International’s senior management has met to consider stopping payments to Andy Coulson’s legal team, the Financial Times has learnt.

Mr Coulson, the former editor of the News of the World who was arrested in July as part of an investigation into phone hacking, is taking legal advice on the testimony he gives to parliament, and on the evidence he gives to police in their two investigations into phone interception and into corrupt payments to police.

It is unclear whether News International intends to stop paying Mr Coulson’s legal fees as far as the police investigations are concerned, as well as the fees that relate to the testimony he gives to parliament. News International declined to comment.

Mr Coulson retained Jo Rickards, a partner at DLA Piper, when he was first arrested and News International has picked up his legal bill. Ms Rickards, a criminal defence lawyer, charges at least £400 an hour. DLA Piper declined to comment.

Mr Coulson, who resigned from the tabloid amid the hacking scandal, received hundreds of thousands of pounds in severance payments from News International after he began working as David Cameron’s communications chief in 2007. The media company also fulfilled pension obligations to the end of his two year contract.

Mr Coulson failed to register with the parliamentary authorities that he was still receiving benefits from News International when he obtained a House of Commons pass in September 2007.

David Cameron, then leader of the opposition, personally sponsored the former News of the World editor to obtain the pass, which gave him free access around the parliamentary premises, according to registers in the Commons archive.

But in filling out the form Mr Coulson did not declare that News International was still paying for healthcare – and was also paying his severance in several instalments as well as letting him keep his company car.

The Commons forms say that applicants must register any occupation or employment – of more than £329 a year – if it is “advantaged” by the access given by the pass. That was not strictly relevant to Mr Coulson’s new position as head of press for the Tory party.

However, a second category, “gifts and benefits”, demanded that applicants should declare any benefit received if it in any way “relates to or arises from your work in parliament”.

Labour sources said that Mr Coulson should have declared his benefits from News International in that category, given the strong relationship between the company and the political world.

Tom Watson, the Labour backbencher, said he was writing to the Standards Commissioner to request that he investigate the matter.

“We now know that in September 2007, Andy Coulson was receiving staggered payments, free private healthcare and apparently a motor car from News International,” Mr Watson said.

“When he applied for his House of Commons pass, Mr Coulson was expected to declare these hidden payments under parliament’s transparency rules. He failed to do so. Moreover, instead of being allocated a political party press pass, he was placed on David Cameron’s personal allocation of passes. This meant David Cameron had to personally vouch for his application so presumably they had a discussion about it.”

Soon after obtaining the pass Mr Coulson was given a new “journalist’s pass” – not unusual for political aides – for which he was asked to declare any substantial financial outside earnings – over £657 annually – for that year.

Again he did not declare that he had received large payments from News International through his severance package that year.

Mr Coulson continued to hold a parliamentary pass for at least two months after he resigned in January this year as Downing Street’s head of communications.

A Tory aide said that it was up to individuals to ensure that their parliamentary pass entries were correct. “It is not for CCHQ [Conservative Central Headquarters] to organise it,” he said.

The Conservatives have been struggling to explain the revelation that Mr Coulson was still receiving large payments from News International even after going to work for the party.

Only last month the Tories denied that he was paid by anyone else during his time at Tory headquarters. Mr Coulson resigned from the News of the World in January 2007 and started his new political role in July of the same year, but continued to receive money from NI until the end of that year.

A Tory spokesman insisted that there was a difference between the severance payments in question and receiving any kind of salary from News International.

“We were not aware until Monday 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 paid by the Conservative party.”

The revelations have prompted unease among some Liberal Democrats about their coalition partners. Andrew George, MP for St Ives, said that “David Cameron’s judgment has been put into question”.

“This is extremely bad news for Cameron, in particular, because it points the finger at him, his judgment and his ability to ask questions about the probity and honesty of people that he has appointed to an extremely powerful and significant job,” Mr George said. “There was already a cloud of suspicion hanging over Andy Coulson at that time. Did Cameron really question him, did he really put him in a vice and go through all the issues with him?”

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