The Metropolitan police’s Deputy Assistant Commissioner told the Leveson Inquiry this morning that Operation Elveden has revealed there was “a culture at the Sun of illegal payments while hiding the identity of the officials”.

Discussing the recent arrests of journalists at the tabloid over alleged improper payments, Sue Akers said that payments to sources were openly referred to within the Sun, and that one official has been paid more than £80,000 over a number of years, while another journalist received £150,000 over a period to pay a source.

Akers said Operation Elveden, which investigates payments to police officers, revealed a “network of corrupted officials”, and that payments were made not only to police officers but wide range of public officials across the military, prisons, police and health departments. Akers added that were was a “tradecraft” of hiding cash payments by making them to a source’s friend or relative, a practice that was authorised at a “senior level” at the paper.

The revelations were made as the Leveson Inquiry began its second module, which examines the relationship between the press and the police.

In a dramatic morning, Inquiry counsel Robert Jay  QC discussed an email from ex-News International legal manager Tom Crone to former News of the World editor Andy Coulson, which revealed that Coulson was told in 2006 that there were over £1 million of payments to private investigator Glenn Mulcaire, and that Mulcaire had hacked hundreds of phones.

The email, based on a briefing that Crone had been told by then Sun editor Rebekah Brooks, showed that Brooks was aware the police had found evidence of News International’s payments to Mulcaire, and that police had asked her whether she “wanted to take it [the investigation] further”.

It was revealed that after the 2006 arrest of Mulcaire and former News of the World royal reporter Clive Goodman, the police realised that there were hundreds of individuals who had been targeted for hacking, yet argued that counter-terrorism was more important than investigating the practice.

In his opening remarks, Jay said the relationship between News International and the Metropolitan police was “at best inappropriately close, and if not actually corrupt, very close to it.”

He added that there was an “obvious risk when two powerful organisations come into contact” arguing that there was scope for “self-interest” and that it “does not take many rotten apples to undermine the whole body politic.” Jay cited that risks might include off the record briefings with an “obvious lack of transparency” and the attribution of stories to police sources who may not in fact be police sources.

Lord Justice Leveson also made a thinly-veiled rebuttal of remarks made by education secretary Michael Gove that the Inquiry had had a chilling effect on the British press.

Leveson argued that criticism of the Inquiry was “troubling”, and that the inquiry itself had “done no more than follow its mandated terms of reference”.

In a speech to journalists at Westminster last week, Gove claimed there was now a “chilling atmosphere towards freedom of expression which emanates from the debate around Leveson”.

“I do not believe the inquiry was or is premature, and I intend to continue to do neither more nor less than was required of me,” Leveson said.

He reiterated his belief in freedom of speech and freedom of the press, but said journalism must obey the “rule of law” and act in the public interest. He said he was “not interested” in becoming an arbiter of what a free press should look like.

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