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 News International, BBC correspondent Robert Peston has claimed. His salary as editor of the News of the World is believed to have been in excess of £200,000.
Peston’s report also alleged Coulson’s severance package included continued access to healthcare as well as keeping hold of his company car.
Prime Minister David Cameron now faces “serious questions” over the claims, according to the Labour Party.
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.”
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.
The Prime Minister took Coulson into government with him, putting him on the public payroll when he made him director of communications.
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.”