It has been eight weeks since former News International chief executive Rebekah Brooks revealed to a parliamentary committee hearing in London that it was British chancellor George Osborne who had recommended ex-News of the World editor Andy Coulson for the top communications job in Downing Street.

Mr Coulson resigned in January of this year citing "distractions" to do with his former employers. Five months later he was arrested on charges related to phone hacking allegations.

So why was Mr Osborne so keen to employ Andy Coulson?

It has now been alleged Mr Osborne was "indebted" to Mr Coulson after the now disgraced editor wrote a favourable editorial dismissing the claims of a former madam who linked Mr Osborne to cocaine and prostitution.

That woman, Natalie Rowe, has now spoken to Lateline in her first television interview.

Mr Osborne, 41, is a close friend of prime minister David Cameron from university. As chancellor of the exchequer, he lives next door to Mr Cameron at 11 Downing Street.

Ms Rowe, the former madam of the Black Beauties escort agency, says she and Mr Osborne were more than just friends.

Her boyfriend at the time was William Sinclair - a friend of Mr Osborne, and the descendent of one of the biggest landowners in the UK.

The pair were members of Oxford University's Bullingdon Club, a male-only institution with a reputation for heavy drinking and riotous behaviour.

Ms Rowe says Mr Osborne was "intrigued" by her line of work.

"What initially happened was is that William and George... I'd left them at my apartment. I initially kept [my job] a secret from William. I mean, they knew that I had an escort agency but they didn't know what I did," Ms Rowe said.

Sorry, this audio has expired Rowe discusses claims in first broadcast interview

"When I got back they'd found the paddles and the whips, the chains and the handcuffs. But they found it quite amusing.

"And you know I thought it was going to be more horrific an experience, that William was going to be really peed off by his girlfriend, you know, doing ... what was she doing with all this stuff.

"But it's come clean. And I said, 'look, [I] like to dominate men'. And George was intrigued indeed about that side of me."

In 1994 Ms Rowe became pregnant to Mr Sinclair. They threw a party to celebrate.

Photographs taken that night show Mr Osborne smiling with his arm around Ms Rowe. A white powder on the table in front of them is said to be cocaine.

Ms Rowe is adamant she was not taking drugs that night because she was carrying her son.

But she says Mr Osborne took the drug "on a regular basis" with her and his friends.

She says there are other witnesses and people that know the truth.

"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," she said.

"I mean it's been said in the newspapers that he was at university [at the time]. He wasn't. At the time he was working for [former Tory leader now foreign secretary] 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 he definitely was in government by then, but I think he was getting more and more of a high profile."

In the House of Commons, Mr Osborne and Mr Cameron have both refused to answer questions about whether they had taken illegal drugs.

Phone hacked?

Former News Of The World editor Andy Coulson quit over the phone hacking scandal. ( Ben Stansall, file photo: AFP )

After some negotiation, Ms Rowe decided to sell her story to The Sunday Mirror. She was then shocked when on the same day it was published on page one of the News Of The World.

Police have since told her that reporters from Rupert Murdoch's biggest selling newspaper were hacking her phone.

More stunning to her lawyer Mark Lewis was the way the News Of The World approached Ms Rowe's story, calling her a cocaine-snorting call girl and using an unnamed source to undermine her credibility.

"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," Mr Lewis said.

Mr Coulson also wrote an editorial - or had it written for him - dismissing Ms Rowe's story.

It said Mr Osborne had been a young man who got caught up in this murky world.

The editorial then spoke on his behalf, saying: "Mr Osborne robustly condemns drugs for the destruction they wreak."

Mr Lewis says the News Of The World editorial "could have gone completely the other way".

He says the editor's decision on which way to "spin the story" was something that determined Mr Osborne's future in politics.

Mr Lewis says Mr Coulson could have ended Mr Osborne's career with a scathing editorial.

"If it would have been written the other way it would have finished his career, I'm sure," he said.

"It could have said, for example, whilst we do not believe that George Osborne took drugs, he showed a serious error of judgment being at the party or being at the flat where drugs were taken, where there was an allegation of prostitution. He showed that error of judgment and therefore he's not right to be in the heart of politics."

When the allegations were first published six years ago, Mr Osborne's office dismissed them as a slur and said Ms Rowe was a casual acquaintance whom the future chancellor barely knew.

Mr Osborne said he had never been intimate with Natalie Rowe or taken drugs with her.

But the now-chancellor has never sued a newspaper or Ms Rowe about her claims.

"One would have thought George Osborne would have looked at it and said the last person that I want to be in the heart of my government is somebody who had that information or who had been vengeful enough against me to write or publish a story that had me with cocaine," Mr Lewis said.

"But if you look at it, because there was a nice gloss put on the story and 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."

The ABC has been trying by letter and by phone to get a comment from Mr Osborne for almost a week but there has been no response.