ALI MOORE, PRESENTER: It's been eight weeks since former News International chief executive Rebekah Brooks revealed to a parliamentary committee that it was the British chancellor of the exchequer George Osborne who'd recommended ex-News of the World editor Andy Coulson for the top communications job in Downing Street.
Andy Coulson resigned in January citing distractions to do with his former employers.
Five months later, he was arrested over phone hacking allegations.
So why was George Osborne so keen to employ Andy Coulson?
Tonight, Natalie Rowe, the woman at the heart of drugs and prostitution claims against the Chancellor, has spoken to Lateline in her first television interview.
Europe correspondent Emma Alberici has been investigating the history of George Osborne's links with the News of the World and allegations that Andy Coulson manipulated coverage to the advantage of the man who would become Britain's Chancellor.
EMMA ALBERICI, REPORTER: Natalie Rowe was once dubbed a ticking time bomb, destined to blow away a couple of young Tories chances of ever making it anywhere near Downing Street.
Her story, published in the News of the World, about nights spent taking cocaine with George Osborne and supplying prostitutes for Mr Osbourne's friends, could have ended his political career.
NATALIE ROWE, FORMER ESCORT: I remember, you know, on one particular week I heard that Cameron was being asked whether he'd taken drugs and George was being asked the same question, I believe - not sure, but I knew there was an issue about who had taken drugs, and I, for reasons that I won't go into, I decided to sell my story.
EMMA ALBERICI: It was October 2005. In a matter of days, voting would begin to decide the future leader of the Conservatives. George Osborne was campaign manager for his good friend David Cameron.
Natalie Rowe was in her early 20s when she met George Osborne. She was running an escort agency. Her boyfriend at the time was William Sinclair, a descendant of one of the biggest landowners in the UK.
He and George Osborne were members of Oxford University's Bullingdon Club, a male-only institution with a reputation for heavy drinking and riotous behaviour. An invitation to join was usually restricted to those who'd studied at Eton, the world's most exclusive boys' school.
Tell me about what you recall about George Osborne. What was he like?
NATALIE ROWE: Um, he was kind of the outsider in the group. Most of the guys were all from Eton and he hadn't gone to Eton, and they - he would be kind of like a butt of their joke - sort of like - it was an issue that he wasn't a.) from any sort of aristocratic background, and that he hadn't gone to Eton. And he was sort of - it was sort of as if he wasn't quite on the same level as they were - or that's how I perceived it.
EMMA ALBERICI: And so, were you friends?
NATALIE ROWE: Me around George?
EMMA ALBERICI: Yes.
NATALIE ROWE: Yes.
EMMA ALBERICI: Did it ever become more than a friendship?
NATALIE ROWE: Yes.
EMMA ALBERICI: What did George Osborne think about your line of work?
NATALIE ROWE: He was very intrigued.
What initially happened was - is that William and George and Christopher, I'd left them at my apartment in Prince of Wales Terrace. Because I initially had kept it a secret from William. I think he knew something was going on, but I didn't ever really tell them. I mean, they knew that I had an escort agency, but they didn't know that I - what I did.
And when I got back they'd found the paddles and the whips, the chains and the handcuffs. But they found it quite amusing.
I thought, "Look, I’m going to come clean," and I said, "Look, I like to dominate men," and George was pretty intrigued, indeed, about that side of me.
EMMA ALBERICI: In 1994 she became pregnant to William Sinclair. They threw a party to celebrate. George Osborne brought flowers and cash, money Natalie Rowe says was to buy illegal drugs.
The white powder seen variously on the table in front of them is said to be cocaine. Natalie Rowe is adamant that she did not take drugs that night because she was carrying her son.
NATALIE ROWE: I mean, it's been said in the papers that he was at university. He wasn't. At the time he was working for William Hague. I remember that vividly. Because he called William Hague "insipid", and I didn't know what the word meant. I do now.
So there was cocaine on the table. And George Osborne did take cocaine on that night, and not just on that night; he took it on a regular basis with me, with his friends. There are more witnesses, not just me, that witnessed George Osborne taking cocaine.
So, there are other people out there that know the truth. He - I remember vividly that on that particular night, he had taken a line and I said to George, jokingly, that, "When you're prime minister one day, I'll have all the dirty goods on you." And he laughed and took a big, fat line of cocaine.
EMMA ALBERICI: When it was published in what was then Britain's biggest selling newspaper, the News of the World, it was as much of a shock to Natalie Rowe as it was to George Osborne. Not only had they stolen the story after she'd sold it to the Sunday Mirror, they'd painted her as the villain.
A statement from the then rising star of the Tory Party said he'd met the so-called vice girl through her boyfriend, but that he'd never been intimate with Natalie Rowe or taken drugs with her. In the words of the News of the World editorial, he was just a young man who got caught up in this murky world.
Osborne, who now runs party leadership hopeful David Cameron's campaign, has now owned up to his encounters with a cocaine-snorting call girl and, "Robustly condemns drugs for the destruction they wreak." "Last week we said that the Tory leadership is Cameron's for the taking. Nothing published since then has made us change our mind."
Right alongside the editorial was a weekly column for which senior Tory William Hague was being paid £200,000 a year.
MARK LEWIS, LAWYER: The editor at the time was Andy Coulson and I think that's worth remembering because of the future relationship that we have between the Conservative Party, the prime minister and Andy Coulson. And the decision on which spin to give to the story by the editor of the News of the World particularly was something that determined his future in politics.
EMMA ALBERICI: You think so?
MARK LEWIS: Undoubtedly so, because the editorial could've been written the other way, and if it would've been written the other way, it would've finished his career, I'm sure. The power of the press, the power of the News of the World, the power of The Sun to determine the outcome of elections, it was significant; it was recognised as significant by the newspaper itself.
EMMA ALBERICI: George Osborne's office claimed that the stories that appeared were defamatory and untrue, and yet he didn't sue Natalie Rowe or any of the newspapers. Quite the contrary; within two years of those cocaine and prostitution headlines, George Osborne was pushing David Cameron to hire the very man who published the story, ex-News of the World chief Andy Coulson.
Many within the Tory Party itself were shocked when the man who resigned over his staff's phone hacking convictions then made it all the way to Downing Street as director of communications for the Prime Minister.
DAVID CAMERON, BRITISH PRIME MINISTER: With 20/20 hindsight and all that has followed, I would not have offered him the job and I expect that he wouldn't have taken it. But you don't make decisions in hindsight, you make them in the present. You live and you learn, and believe you me, I have learnt.
ED MILIBAN, BRITISH OPPOSITION LEADER: That isn't good enough. Because people - it's not about hindsight, Mr Speaker. It's not about whether Mr Coulson lied to him. It is about all the information and warnings that the prime minister ignored.
MARK LEWIS: He would look at - one would have thought George Osborne would've looked at it and said that, "The last person I want to be in the heart of my government is somebody who'd had that information or who'd been vengeful enough against me to write or publish a story that had me with cocaine."
But if you look at it, because it was a nice gloss put on the story, an editorial that effectively gave George Osborne the benefit of the doubt, then you could say, "Well, George Osborne was almost indebted to Andy Coulson." Andy Coulson had done George Osborne a favour and perhaps it was time for George Osborne to reciprocate and do a favour back.
EMMA ALBERICI: Last month, police from Operation Weeting, looking into the illegal accessing of voicemails by the News of the World investigator Glenn Mulcaire, told George Osborne he was a victim of phone hacking. The Chancellor has said he won't pursue a claim against the Murdoch empire. Natalie Rowe was told she too was a target.
NATALIE ROWE: I have nothing to hide, so whatever they listened or heard, I've got no worries with. But I just think it's absolute violation of my privacy and no-one deserves to have that done to them.
EMMA ALBERICI: Did the police officers show you anything to prove that your phone was being hacked? Did they show you any documents?
NATALIE ROWE: Yeah. I saw a document with one of George Osborne's - well, it was Christopher Coleridge, who was one of the - who was there on the night of the cocaine party.
EMMA ALBERICI: One of your friends.
NATALIE ROWE: That, in the photo, one of me and George. It was one of George's friends. He had been to Oxford with George and Eton with William, who was my boyfriend at time. His name was on the - it was the first name on the list and then it's heavily redacted bit that I can't see. And then there's my name and various aliases that I've used in the past and my phone number.
EMMA ALBERICI: What's your experience of dealing with the tabloids here in the UK?
NATALIE ROWE: I'll tell you what I've - I learnt very quickly that you can't trust a newspaper. You can't trust them.
They completely diluted it and made me look like I was not to be trusted, you know, this vice girl, and that, you know, I felt that it looked as if you can't really believe this woman, and also George Osborne has gone round saying that this woman that he barely knew, who was touting a story round, well George more than knew me. And, you know, I've always said that the truth'll always catch up on you and it's going to catch up on him.