Culture Secretary Jeremy Hunt told his special adviser Adam Smith to quit after emails revealing the close relationship between his department and Rupert Murdoch's News Corporation were released, the Leveson inquiry heard today.
It was revealed this week that News Corp lobbyist Frederic Michel exchanged 191 telephone calls, 158 emails and 799 texts with Mr Hunt's team between June 2010 - when News Corp announced its bid - and July last year.
More than 90 per cent of these were exchanged with Mr Smith.
Giving evidence to the inquiry today, the former special adviser said the Mr Hunt had told him not to worry on the evening that the documents were published.
But the next day after a morning spent in meetings the special adviser was told everyone "thinks you need to go," he said.
Mr Smith said after the meeting he was handed a prepared resignation statement, which "came from the Cabinet Secretary's office," and left his job.
Meanwhile Mr Hunt faced renewed calls for his own resignation after it emerged he had written to David Cameron backing the Murdoch BskyB takeover bid - just before being given the power to adjudicate over it.
Mr Hunt sent a memo to the Prime Minister arguing the case for the bid just weeks before Business Secretary Vince Cable was stripped of the decision-making role.
The draft document shows that Mr Hunt told the PM that James Murdoch was "furious" with Mr Cable's decision to refer the bid to regulator Ofcom.
He added that it would be "totally wrong" to "cave in" to opponents of the bid.
Mr Cameron today defended Mr Hunt and his decision to give him the role.
The PM said: "I don't regret giving the job to Jeremy Hunt, it was the right thing to do in the circumstances, which were not of my making.
"The crucial point - the really crucial point - is did Jeremy Hunt carry out his role properly with respect to BSkyB and I believe that he did."
Mr Hunt is one of a number of high-profile political figures scheduled to give evidence to Leveson next week along with former prime minister Tony Blair and Mr Cable.
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