UPDATE 4-British PM's former aide charged with perjury
* Andy Coulson charged with perjury
* Allegations relate to phone hacking
* Charges raise questions about PM Cameron's judgement
By Kate Holton and Guy Faulconbridge
LONDON, May 30 (Reuters) - British Prime Minister David Cameron's former spokesman was charged with perjury on Wednesday, after denying in court any knowledge of widespread phone hacking by reporters at Rupert Murdoch's News of the World.
The charges against Andy Coulson, a former editor of the tabloid weekly, damages Cameron because it calls into question his judgment in employing a man so closely linked to the paper which was under suspicion of obtaining stories by illegal means.
Scottish police detained Coulson at his home in London early on Wednesday and drove him to Glasgow for hours of questioning before charging him.
Prosecutors said his arrest followed his appearance before the High Court in Glasgow in 2010 over a News of the World story published when he was editor.
Coulson, Cameron's communications director from 2007 to January 2011, told the court he had no knowledge of illegal activities by reporters while he was the paper's editor. He was arrested last July by police investigating phone hacking and bribery at the News of the World.
Perjury can in theory result in a life sentence, but sentences of a couple of years are more typical, a spokesman for the Scottish government justice department said.
"This simply reinforces the questions that are hanging over the prime minister about his judgment in appointing Andy Coulson in the first place," said Ivor Gaber, professor of political journalism at City University in London.
"We now know that lots of people warned Cameron that this might not be an appropriate move," he added.
Coulson is the second ex-editor of the News of the World to be charged with a crime this month, embarrassing Cameron. Rebekah Brooks, a personal friend of the prime minister who became a senior Murdoch executive, was charged on May 15 with interfering with the police investigation into the hacking scandal.
The charges hand valuable political ammunition to Cameron's opponents, at a time when the close ties between leaders of the current and last governments and Murdoch's lieutenants are being exposed at an inquiry into collusion between the press, politicians and the police.
Opposition Labour leader Ed Miliband, who has repeatedly attacked Cameron over his ties to Murdoch, has called Coulson's appointment an appalling error of judgment.
A current spokesman for Cameron and a lawyer for Coulson declined to comment.
Coulson resigned as News of the World editor when his royal correspondent and a private investigator were jailed for hacking into phones in 2007. He denied any knowledge of the practice but said he took ultimate responsibility for the crime.
Months later he went to work for Cameron, first in opposition and then in government, helping to craft Cameron's media strategy.
But when police reopened the probe into phone hacking, he was forced to stand down as it became clear that the practice had been widespread at the paper under his leadership, although he maintained he knew nothing about such activities.
Coulson was called to the Scottish court in 2010 to answer questions about a front-page News of the World story about a Scottish socialist politician, Tommy Sheridan, who the paper accused of visiting a swingers' club.
"I don't accept there was a culture of phone hacking at the News of the World," Coulson told the court when questioned about the story.
Sheridan won a defamation action against the paper in 2006 but was found guilty of perjury in the 2010 trial and jailed for three years.
The hacking scandal proved hugely costly for Murdoch, who closed the 168-year-old News of the World in July 2011 after it emerged that reporters had hacked into a murdered schoolgirl's phone, causing a public outcry.
Murdoch paid off a string of people who brought claims against his News Corp over phone hacking, settling cases before they went to trial. News Corp took a charge of $63 million this month for costs related to the scandal.
More seriously, it was forced to abandon its biggest ever takeover bid, a $12 billion bid to buy the 61 percent of lucrative pay-TV group BSkyB it did not already own.
A judicial inquiry sparked by the hacking affair has also widened to examine the government's own conduct as it weighed whether to approve the deal, with one minister facing opposition calls to quit after evidence showed an aide had leaked sensitive information to News Corp during the takeover process.
On Wednesday another minister told the inquiry he had been told his Liberal Democrats, the junior party in the government coalition, would be "done over" in Murdoch's British papers if he made the wrong decision over the BSkyB bid.
Business Secretary Vince Cable had been in charge of weighing whether the deal should go ahead, until two undercover reporters for a rival newspaper recorded him as saying he had "declared war" on Murdoch over the bid. He said on Wednesday that he had used such strong language because he had been angered by News Corp's behaviour.
"I had heard directly and indirectly from colleagues that there had been veiled threats that if I made the wrong decision from their point of view, my party would be, I think somebody used the phrase, 'done over', in the News International press," he said. "I took those things seriously, I was very concerned."
A News Corp lawyer told the inquiry it was difficult for the company to respond to the allegation because Cable failed to give any concrete details about who had said or done what.
Cameron is due to appear before the inquiry in early June.
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