Prime Minister David Cameron faces “serious questions” over claims his former communications chief received several hundred thousand pounds from News International while he was employed by the Tories.
A series of severance payments were made to former News of the World editor Andy Coulson for several months after he began working for the Tories, according to the BBC.
The instalments totalled the full entitlement under his two-year contract as editor of the now defunct tabloid which was published by New International, it was claimed.
His severance package also included continued access healthcare as well as keeping hold of his company car, the corporation said.
A Labour spokesman said: “David Cameron now faces allegations that one of his top advisers was also in the pay of News International.
“The Prime Minister needs to immediately make clear whether these allegations are true.
“There are serious questions to answer about Mr Coulson’s employment in Downing Street and the country should not have to wait for full transparency.”
Mr Coulson was hired by the Conservative party in July 2007 on a reported salary of £275,000, six months after he quit as editor of the Sunday newspaper when its royal editor Clive Goodman and private investigator Glenn Mulcaire were jailed for hacking into the voicemails of Buckingham Palace staff.
Mr Coulson quit in January as pressure over phone-hacking continued to mount, saying it was distracting him from his role.
Last month he was arrested on suspicion of corruption and phone hacking and was released on police bail until October.
A Conservative party spokeswoman said: “Senior party officials have no knowledge of Andy Coulson’s severance arrangements.”
A spokesman for News International said: “News International consistently does not comment on the financial arrangements of any individual.”