Tony Blair’s former spin doctor has defended the Labour party’s dealings with Rupert Murdoch.

Recalled to the Leveson Inquiry to discuss relations between the press and politicians during his time at Number 10, Alastair Campbell said that the News Corp boss was “certainly the most important media player, without a doubt”.

The Murdoch-owned Sun famously switched its political allegiance and backed Labour in the 1997 general election, which the party won in a landslide victory.

Approaching Murdoch titles as well as the press more generally was part of a New Labour “neutralisation” strategy, Campbell said, to ensure the party had a level playing field”. He said the Sun was a “significant player” among British newspapers.

Campbell, arguably Britain’s most iconic spin doctor, was Tony Blair’s spokesman when he became Labour party leader in 1994 and went on to be Downing Street press secretary and director of communications after the party came to power.

He asserted that Labour did not win because of Murdoch’s support, but rather the media mogul supported the party “because we were going to win”. Campbell refuted the idea of the perceived power of newspapers being key to winning an election, noting that current prime minister had press backing and failed to win a majority in 2010.

Campbell said he had no evidence to suggest there had been a deal between Blair and Murdoch to support New Labour, and also downplayed the three phone calls between them in the eight days prior to the Iraq war in 2003.

He also sought to downplay the influence of spin — “journalists aren’t stupid and the public aren’t stupid,” he said — and claimed that politicians, rather than newspapers, held real power.

He conceded that the New Labour approach to the media (former prime minister Blair famously dubbed the press “feral beasts”) may have given newspapers “too much of a sense of their own power”.

During his previous appearance at the Inquiry in November, Campbell slammed the British press as “putrid”, and singled out the Daily Mail as perpetuating a “culture of hate” for its crime and health scares.

Campbell was not optimistic about the appetite for change in Westminster. “I don’t think Cameron particularly wants to have to deal with this [the Inquiry],” he said. “It would be very difficult not to go along with the recommendations [that the Inquiry produces], but I don’t think there is much appetite.” He also suggested a speech made by education secretary Michael Gove which alluded to the possible “chilling effect” of the Inquiry on the press “may be part of a political strategy” to ensure the Conservative party would not lose media support.

Campbell speculated that some of the more negative media coverage Cameron received might be “revenge” for his setting up the Inquiry in the wake of the phone hacking scandal last summer.

Meanwhile he stressed what he saw as the importance of the Inquiry, praising groups such as Hacked Off, Full Fact and the Media Standards Trust as representing “genuine public concern about what the media has become”.

Also giving evidence earlier today was former cabinet secretary Lord O’Donnell, who oversaw the vetting process for David Cameron’s former communications chief, ex-News of the World editor Andy Coulson. O’Donnell said that Coulson had not been subject to rigorous developed vetting (DV) checks upon entering Downing Street in 2010, and instead went through a more rudimentary “security check” process.

O’Donnell confirmed that DV checks would have involved Coulson signing a form that would disclose any shareholdings that might amount to a conflict of interest. During his evidence last week, Coulson told the Inquiry he held shares in News Corp worth £40,000 while working at Number 10, which he had failed to disclose properly.

O’Donnell told the Inquiry that a “form was signed, but it didn’t disclose shareholdings, and it should have done.”

Leveson said it would be worthwhile to compare the vetting process undergone by other media advisers, “only to demonstrate that there isn’t a smoking gun”.

The Inquiry, which is currently examining the relationship between the press and politicians, will continue tomorrow with evidence from Sky News political editor Adam Boulton and Conservative party politician Lord Wakeham.

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