News of the World scandal will harm David Cameron

This morning's Guardian breaks what could be a huge political scandal.

The newspaper claims that Rupert Murdoch's News Group Newspapers has paid out more than £1m to settle legal cases that threatened to reveal evidence of his journalists' repeated involvement in the use of criminal methods to get stories.

In particular, the Guardian says the story "poses difficult questions" for:

• Conservative leader David Cameron's director of communications, Andy Coulson, who was deputy editor and then editor of the News of the World when, the suppressed evidence shows, journalists for whom he was responsible were engaging in hundreds of apparently illegal acts

• Murdoch executives who, albeit in good faith, have misled a parliamentary select committee, the Press Complaints Commission and the public

• The Metropolitan police, who did not alert all those whose phones were targeted, and the Crown Prosecution Service, which did not pursue all possible charges against News Group personnel

• The Press Complaints Commission, which claimed to have conducted an investigation but failed to uncover any evidence of illegal activity.

It will also pose a difficult question for David Cameron. How can he possibly continue to employ Coulson?

The BBC quotes a spokeswoman for David Cameron as saying he is "very relaxed" about the story:

"The ramping up of this story is ridiculous - this is about a payment made well after Andy [Coulson] left the News of the World," she said.

But this defence is laughable. The payment was made well after Coulson left the paper, but it was made because of the actions of News of the World journalists while he was editing it.

And as Andrew Neil explained on Newsnight yesterday evening, it is inconceivable that Coulson would not have quizzed his reporters about their methods when they came to him with big stories.

An editor has to be able to judge the truth of a story and how defensible it would be in court. The way the story was come by is central to both these questions.

The irony is that Cameron might well be better off without Coulson. The Conservatives made their come back precisely by ceasing to appeal to the baser instincts of Sun readers and courting the liberal middle class voters they have lost over the last two decades.

But if he insists on trying to hang on to Coulson, David Cameron's squeaky clean image could well be tarnished.