'Self-censoring' scandal at newspaper roils UK press landscape

By Kate Holton and Paul Sandle

LONDON (Reuters) - One of Britain's most storied newspapers has been accused of self-censoring for commercial gain, raising awkward questions about a centuries-old press culture which has prided itself on its no-holds-barred approach to truth telling.

The 160-year-old Daily Telegraph strongly denied accusations in a resignation letter by one of its best known writers, who said the paper had soft-pedalled coverage of a banking scandal to curry favour with an advertiser.

Britain's press, known collectively as "Fleet Street" in reference to the London lane where newspapers were based for generations, is proud of its independence - able to make or break a political reputation with a merciless approach.

In his letter, Peter Oborne, known for caustic attacks on politicians as the Telegraphs's chief political commentator, said the paper had curbed coverage of reports that the Swiss arm of Europe's biggest bank HSBC helped clients avoid taxes. The Telegraph, he wrote, wanted to keep the bank's advertising.

"(It) amounts to a form of fraud on its readers," he wrote. "If major newspapers allow corporations to influence their content for fear of losing advertising revenue, democracy itself is in peril."

The Telegraph came out fighting, denying it had pulled punches in covering HSBC and saying it had "no apologies" for journalism guided by a pro-business editorial line.

"We are proud to be the champion of British business and enterprise," it wrote in an editorial. "In an age of cheap populism and corrosive cynicism about wealth-creating businesses, we have defended British industries including the financial services industry that accounts for almost a tenth of the UK economy, sustains two million jobs and provides around one in every eight pounds the Exchequer raises in tax."

It also lashed out at rival news sources that had criticised it: "None is the paragon of moral or journalistic virtue that their criticisms this week might suggest," it said. "All have their own self-serving agendas, both political and commercial."

STRUGGLING

Both the accusation and the Telegraph's rebuttal are likely to sting for a newspaper industry struggling to adapt as readership declines and advertisers move online.

Fleet Street's reputation was sorely damaged in 2011 when Rupert Murdoch shut down the News of the World, a Sunday tabloid, after it emerged that its reporters had illegally eavesdropped on voicemails of countless celebrities and a murdered schoolgirl.

Lengthy public hearings were held into journalists' ethics, revealing uncomfortably close ties between press bosses and those who run the country.

Conservative Prime Minister David Cameron was forced to apologise for hiring as his spokesman a former News of the World editor who was later jailed. Labour former Prime Minister Tony Blair acknowledged that he had given advice to another former News of the World editor on how to deal with the scandal.

The right-leaning Daily Telegraph, nicknamed the "Torygraph" for its longstanding support for the Conservative - or Tory - Party, is chided by its critics for appealing to the middle classes and the middle aged.

But it is the biggest-selling of Britain's "broadsheets", the serious-minded national newspapers that distinguish themselves from the popular "tabloids" traditionally printed on paper half the size. It gained stature in 2009 for an expose of lawmakers' expense claims that resulted in resignations and prosecutions on all sides in parliament at Westminster.

However the paper, like its rivals, has cut staffing levels in recent years as it adapted to the tightened financial times.

In Oborne's resignation letter he lamented what he described as a loss of standards, saying stories were chosen for the number of online visits they bring rather than the news value. The paper had recently run a story about a woman with three breasts, he complained.

"Telegraph readers are a pretty loyal bunch but in terms of the paper's status I think it will cause enormous, long-lasting damage," Steven Barnett, communications professor at the University of Westminster, said of Oborne's letter. "It harms its ability to say 'We stand for truth and accuracy.'"

(Editing by Andrew Osborn and Peter Graff)