David Cameron has always denied discussing the BSkyB bid with James Murdoch but in his testimony to the Leveson inquiry, Murdoch has just revealed that the bid was raised at the famous Christmas dinner at Rebekah Brooks's home.

He told the inquiry that Cameron reiterated that Vince Cable's behaviour had been "unacceptable" (Murdoch contemptuously referred to Cable as having shown "acute bias"), adding:

I imagine I expressed the hope that things would be dealt with in way that was appropriate and judicial. It was a tiny side conversation, it was not a discussion.

His witness statement to the inquiry goes into more detail:

I recall speaking briefly to the Prime Minister on one occasion about the proposal. This was on Dec 23, 2010, at a dinner hosted by Rebekah and Charlie Brooks and attended by a number of other people.

It took place two days after responsibility for the matter had passed to the Secretary of State for Culture, Media and Sport, Jeremy Hunt, (from Vince Cable). On Dec 21 the Prime Minister’s office had issued a statement saying that: ‘The Prime Minister is clear that Mr Cable’s comments were totally unacceptable and inappropriate.’

I recall concurring with that view, and believe I would have appreciated assurances that the process would be handled objectively in the future.

Last year, Cameron told parliament: “I never had one inappropriate conversation”, adding that “[I] completely took myself out of any decision making about this bid”. A spokesman later added that Cameron had “not been involved in any of the discussions about BSkyB”.

Murdoch's insistence that it was "not a discussion" gives Cameron some wriggle room but one is left with the impression that the PM has not been entirely honest on this front.

The other revelation from Murdoch's appearance is that he also discussed the BSkyB bid with George Osborne. Here's the relevant extract from his witness statement:

My diary records an appointment with Mr Osborne on Nov 29, 2010, but I cannot recall whether that was the date on which I had the discussion with him.

I believe we discussed a number of matters, and that I expressed my concern at the slow progress with the regulatory process, my view that the investment would be good for Britain and also my view that there were no plurality issues raised by our proposal.