Yesterday's extraordinary scoop by the Observer, building on the tremendous work done by Guardian Editor Alan Rusbridger and Nick Davies, went unmentioned on the BBC's review of the papers.

Rupert Murdoch personally "got in touch with a friend", described by the Observer as being "at the highest level", to talk to Brown when he was Prime Minister. The request: to cool down the hacking scandal... because it was damaging News International.

"What's so unexpected or interesting about that?", you might ask. But if you do, it shows how have been suckered into accepting the erosion of the rule of law and our democracy, such as it is.

It is widely known that, along with many others, Gordon Brown's phone was hacked when he was Chancellor. Murdoch's News of the World listened to his personal messages with all the potential of using the tabloid to blackmail the man who sets the taxes for News International (or rather permitted them to pay hardly any). As Henry Porter asks, isn't this an issue of "national security"?

The presumption of influence revealed by the Observer scoop sheds more light on the hacking scandal. The heart of the issue is that the Murdoch gang and their associated friends in the press, politics, the civil service and the police, believe themselves to be above the law; they have created a culture of intimidation and polarisation inimical to democracy from which they profiteer. First, they engage in a criminal conspiracy. Then, they use their "high level" friends to make it clear that they expect the Prime Minister to protect them. This is the route to becoming like Putin's Russia.

Who is this high-level friend?

The question has added urgency thanks to Hugh Grant's hilarious exposé of the News of the World phone bugger Paul McMullan in this week's New Statesman, brilliantly edited by Jemima Kahn. Grant asks McMullan if Rebekah Brooks, who was Editor of News of the World before becoming Editor of the Sun and is now the Chief Executive of News International, knew "all about" the illegal phone hacking, he replies:

Absolutely. Not only did she know, but Cameron must have known - that's the bigger scandal. He had to jump into bed with Murdoch as everyone had, starting with Thatcher in the seventies... Tony Blair...

McMullan goes on to insist that Rupert's son James Murdoch, now tagged to take over from his father, as well as Rebekah Brooks and David Cameron, are "All mates together. They all go horse riding". Personally, I'm not convinced about the horse riding, it's such a public and photogenic activity. After all Rupert Murdoch goes into Downing Street through the back door. But there has been no convincing denial of their social friendship their Christmas gathering and all the tacit knowledge and understanding of each others needs and interests that goes with being on texting terms.

The Observer reports that a spokesman for Tony Blair says it is "categorically untrue" that he was the high-level friend who spoke to Brown on Murdoch's behalf. Blair's spokesman added "no such calls ever took place". Face to face then? Or perhaps this is another case of our former Prime Minister having one of his frequent fits of "sincere belief" with which he regaled the Chilcot Inquiry when asked how he knew there were weapons of mass destruction in Iraq. There are lies, statistics and Tony Blair.

Ex-Prime Ministers deny that they phone their successor as Prime Minister to prevent the investigation of crimes by News International, while a subsequent Prime Minister is even more "in bed" with the Murdoch machine than his predecessors.

News International can threaten, as it did the Parliamentary Select Committee to prevent Rebekah Brooks from being forced to give evidence. It can call down the wrath of the tabloids and its TV channels and even intimate a Hollywood boycott thanks to Murdoch's ownership of Fox. It generates a mafia culture that warns off politicians and celebrities from crossing its interests and it pays the police as well. Nor is it just an 'at arms-length' media conglomerate. Its boss-to-be has a clear political and economic agenda, set out in his MacTaggart Lecture. For all James Murdoch's attack on the public sector and his vaunting of 'competition', News International relies upon a special, indeed intimate relationship with the executive power of the state to undermine our privacy and our freedom while feeding our fears.

What's it all for? For a start, money. It can't not be handy to have some inside dope on the Chancellor if you don't want the law changed to prevent your tax avoidance. An industry expert suggested to me that perhaps even the main motive of the Murdoch bid for BSkyB is that the company pays significant tax to the UK. But if it is taken over outright by News International this can be avoided (a case for UKUncut?).

The kind of money involved calls for political influence and therefore a political system that delivers this kind of privilege.

Roy Greenslade makes a neat point about the News of the World. After years of lies and denials the paper has suddenly admitted that its wrongdoing went wider than a "rogue" reporter or two. "It is not without irony", Greenslade notes, "that a paper that makes so much of its investigative skills" has managed to evade its own investigative powers. Also, the paper's neighbours in Murdoch's Wapping complex include The Times - and the once mighty engine of investigative journalism The Sunday Times. They too failed the public while serving their owner.

But the story goes further than who knew what at NoW. It isn't just about the weakness of the Press Complaints Commission, that Greenslade reminds us of, or confirming that Andy Coulson and Rebekah Brooks encouraged the illegal hacking and James Murdoch went along with it by approving compensation payments to silence victims. The story is not primarily about the wrongdoing of a newspaper or two (or three). It is about the penetration and manipulation of the political system that governs Britain.

This is what needs to be uncovered. Once again, as over Iraq, the British public seems to be wiser than its rulers in smelling a rat, with the majority against Murdoch's total acquisition of BSkyB not because of issues of plurality but simply because it will confirm that he has "too much power". Once again, will the public just have to put up with it?

This is why today's Guardian story that the cabinet secretary, Gus O'Donnell, blocked an attempt by Gordon Brown to hold a judicial inquiry into the NoW allegations before the general election seems sinister. In this particular instance it might not be, as Brown was desperate to win friends and reverse his losing position and it was a gesture aimed at a newspaper that had come out against his re-election. He was quite capable of using the state for partisan purposes and if so this should indeed have been stopped.

On the other hand is Gus also thinking ahead? One of his recent predecessors as head of our civil service, Richard Wilson now Baron Wilson, went on I believe to serve on the boards of... News International and BSkyB.