A humbled and diminished Vince Cable was tonight allowed to cling on to his cabinet post as business secretary, but was stripped of all responsibility for media policy after it emerged he had told undercover reporters that he had "declared war" on Rupert Murdoch over the media magnate's plans to take over all of BSkyB.
Cable's reckless claims, in a secretly recorded conversation, were considered a flagrant breach of his duty to take a quasi-judicial approach to the proposed takeover, and were declared "totally unacceptable and inappropriate" by Downing Street. Many had expected an angry David Cameron to sack Cable or transfer him to a lesser cabinet role.
But instead the business secretary was hauled in front of his party leader, Nick Clegg, and then Cameron. After a series of emergency meetings, which included George Osborne, the chancellor, Clegg felt he could not afford to lose the second most senior Liberal Democrat from the government.
Nearly 70 civil servants responsible for all aspects of media and telecoms policy will now be transferred from Cable's business empire to the Department of Culture Media and Sport headed by Jeremy Hunt, the culture secretary and a Conservative likely to be sympathetic to Murdoch.
One Downing Street source said: "Losing a big chunk of his department is more humiliating for Cable than being transferred to another cabinet post."
But No 10 denied Cable was being parked on the political equivalent of death row pending the expected return to government of David Laws, the former chief secretary to the Treasury and a close ally of Clegg. Laws stood down from the post in May and is hoping to be cleared of allegations of expenses abuse by the Commons standards and privileges committee early next year. The government will be hoping that the onset of the Christmas recess will create a political lull that will shield Cable from media calls for him to thrown out of the government.
Ed Miliband, the Labour leader, said Cameron had made the wrong judgment in keeping Cable, "who had been preserved to continue as a fig leaf for this rightwing government".
If Cable survives, his political influence in the cabinet will have shrunk immeasurably and will take years to be rebuilt.
A sheepish Cable, once the pre-eminent figure in British politics, said yesterday: "I fully accept the decision of the prime minister and deputy prime minister. I deeply regret the comments I made and apologise for the embarrassment that I have caused the government."
Cable had been reprimanded in public by Clegg and Cameron for remarks recorded by Telegraph reporters suggesting he could bring the government down if he walked out.
He also claimed the government was in danger of pushing through a kind of Maoist revolution in public services that was in danger of getting out of control. He asserted that Cameron was still secretly planning to get rid of winter fuel payments. Cable confided these private thoughts to what he believed were two young female constituents he had never met, a decision that left his Lib Dem colleagues flabbergasted at his naivety or vanity.
At a prearranged press conference Cameron and Clegg tried to draw a line under the episode by chiding Cable, saying he had been right to be embarrassed and to apologise. But within minutes of the hour-long press conference ending, the BBC revealed that the Telegraph had suppressed the more explosive part of the transcript in which Cable said he had declared war on the Murdoch empire.
The business secretary has legal responsibility for deciding whether to accept any Competition Commission decision that a takeover of BSkyB could go ahead. The BBC revealed it had been phoned by a whistleblower inside the Telegraph disclosing the unpublished part of the transcript.
Cable is reported in the transcript as saying: "I am picking my fights, some of which you may have seen, some of which you may haven't seen. And I don't know if you have been following what has been happening with the Murdoch press, where I have declared war on Mr Murdoch and I think we are going to win."
He also spoke of the importance of not politicising the BSkyB decision "because it is a legal decision", but then added: "I have blocked it using the powers that I have got and they are legal powers that I have got. I can't politicise it but from the people that know what is happening this is a big, big thing.
"His [Murdoch's] whole empire is now under attack … so there are things like that we do in government, that we can't do … all we can do in opposition is protest."
Within an hour of the transcript being released, News Corporation said it was shocked by Cable's attitude, saying it raised serious questions about due process. The Telegraph claimed it had been planning to publish the transcript, but it seemed equally likely that executives at the paper, anxious not to see the Murdoch takeover go ahead, wanted to protect Cable's role.
News Corporation owns 39% of BSkyB and wants to buy up the remaining 61% for £7.8bn. Cable had, on 4 November, handed the bid to Ofcom, the media regulator, with Ofcom due to make its recommendation by 31 December on whether the takeover should be referred to the Competition Commission. In turn, Cable would have been the ultimate arbiter of the commission's recommendations. That ultimate decision will now be taken by Hunt, alongside his media minister Ed Vaizey.
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