Sajid Javid, pictured, is said to have discussed Surrey Council's case with Chancellor Philip Hammond
Ministers were under pressure last night after a secret recording appeared to show they had reached a 'gentleman's agreement' with a flagship Tory council over extra cash for social care.
Last month Theresa May strenuously denied that the government had offered a sweetheart deal to Surrey Council to persuade it to cancel a threat to put up council tax by 15 per cent.
But, in a leaked tape, council leader David Hodge is heard saying that a 'series of conversations' had been held with senior ministers and officials over their demand for more funding.
Communities Secretary Sajid Javid had discussed Surrey's case with Chancellor Philip Hammond, and in the end a 'gentleman's agreement' had been reached, he said.
The recording is an embarrassment to senior ministers on the eve of the Budget, which is expected to include help for town halls struggling to pay for social care.
When challenged over claims of a secret deal by Jeremy Corbyn last month, Mrs May described the allegations as 'alternative facts'.
Last night Labour demanded Mr Javid and Mr Hammond both come to the House of Commons and apologise for their previous denials.
A government spokesman insisted that it was 'simply untrue' to say that a special deal had been reached.
Theresa May, pictured above, strenuously denied that the government had offered a sweetheart deal to Surrey Council to persuade it to cancel a threat to put up council tax
Earlier this year, Surrey outlined plans to hold a referendum on whether to increase council tax by 15 per cent to meet the rising costs.
But these plans were suddenly dropped last month, with Mr Hodge saying the rise would be limited to 5 per cent.
Labour claimed leaked text messages showed that Surrey had reached a sweetheart deal with Mr Javid – a deal which was not available to other local authorities.
Ministers denied there was a deal, saying Surrey had simply been allowed to retain more of its own business rates, rather than having to hand much of it to Whitehall.
But on the tape, leaked to BBC Radio, Mr Hodge reveals he had spoken to Mr Javid by phone when the Communities Secretary was sitting in his car on Downing Street.
He tells local councillors he was 'looking for assurances, looking for clarification, looking for help on how we could stop a referendum'.
He said Mr Javid then went in to 11 Downing Street to speak to Mr Hammond.
'He then went inside and spoke to the Chancellor – I think I can say that', the recording said. 'Then the spad rang me with what we can and cannot say.'
The Surrey Council leader went on: 'I have something in writing… which gives me a certain amount of comfort but I'm not going to release that information for obvious reasons.
Extraordinary text messages revealed by Mr Corbyn from Surrey council leader David Hodge to a man called 'Nick'. He suggested an agreement was close for him to call off a council tax referendum on hiking charges by 15 per cent
Mr Hodge said in the texts that Chief Secretary David Gauke has been involved in the discussion and made a clear link between the 'numbers' and calling off the 'R' - thought to mean referendum
'There may come a time that if what I call gentleman's agreements, that the Conservative party often does, are not honoured, we will have to revisit this in nine months or a year's time.
'If we do, let me assure you, you'll have to drag me kicking and screaming not to go for a referendum next year.'
And he urged Tory councillors in the room not to 'put what I am going to say on a tweet'.
Mr Hodge later told the BBC that he had had the conversations with government to try and get 'a better deal'.
Last night shadow communities minister Gareth Thomas said: 'Sajid Javid and Philip Hammond should come to the House of Commons and explain what the gentleman's agreement that they've done – explain why they are offering it to Surrey council and not the rest of English councils trying to manage budgets that are at tipping point.'
Surrey Council leader David Hodge is heard saying in the tape that a 'series of conversations' had been held over their demand for more funding
A government spokesman said: 'As we have repeatedly made clear, there was no special deal for Surrey County Council and they will not receive any extra funding that would not otherwise be provided or offered to other councils.
'To imply the opposite is simply untrue.'
Last night Norman Lamb, the Liberal Democrat health spokesman, accused ministers of lying.
'The Government has shamelessly lied to Parliament and to the British people in denying that any special agreement was made with Surrey County Council,' he said.
'The Prime Minister now has serious questions to answer after she stood at the Despatch Box and called suggestions of a sweetheart deal 'alternative facts'.
'We cannot accept a cosy, secret agreement between Tory Ministers and Tory councils while other parts of the country get a raw deal.'