Coulson's still in Dave's gang – but is he right for Number 10?

In the early days when David Cameron had a comfortable opinion poll lead, he used to boast of his don't-count-your-chickens attitude, saying he hated any talk of "curtain-measuring".

Yet one issue in particular must be nagging at him, and if he was to win the election he'd need to resolve it quickly. Would Andy Coulson, the steely former editor of the News of the World and Cameron's head of communications, join him in Downing Street? Developments last week seem to make that less likely.

Since his appointment in May 2007, Coulson has become integral to Dave's gang and has brought an appropriate degree of tabloid hard-headedness to Cameron's early press team. Coulson offers a street-level, professional counterweight to what can be a slightly distrait team. In short, he knows what real people think. Just the person for the No 10 teamsheet, surely?

Well, yes and no. For Coulson brings baggage. He left the News of the World (owned by Rupert Murdoch's News International) because he was in charge when two of its representatives were sent to jail in early 2007 for illegally intercepting telephone messages. It was unimaginable that a company so badly embarrassed by the episode could have allowed him to continue in the job. Coulson says he knew nothing of the illegal activity. Either way, he would have grounds for feeling sore about the affair, either because he knew nothing but had to pay for it, or because he was the only senior executive (and a Commons committee said it was "inconceivable" that none knew about it) to carry the can.

Whether Murdoch's people felt Coulson, in "doing the decent thing" – as News International press officers asserted with conspicuous vigour – had borne a disproportionate share of the executive blame is not known. In any event, there was a happy symmetry when, soon afterwards, Matthew Freud, Murdoch's son-in-law and a close confidant of (then) Sun editor Rebekah Wade, suggested Coulson for the vacant position of head of Conservative communications. William Hague and George Osborne endorsed the idea, and Cameron, badly in need of a hardened pro, obliged.

Until then, the media baron had been airing his mistrust of Cameron, and some Tories talked bravely of "not needing Murdoch", but Coulson's arrival changed that. Yet it was not the end of the phone-hacking story. Cameron has said everyone deserves a second chance, but Coulson's News International past won't leave him alone. In the autumn, he was grilled in the Commons about it. Then, in November, former sports reporter Matt Driscoll was awarded a record £800,000 for the bullying inflicted on him by Coulson and his team. And in February, Max Clifford was paid around £1m for the same reason, following an agreement with Ms Brooks (formerly Wade), now chief executive of News International.

Can Cameron breathe a sigh of relief that it is all over? Probably not. There remains a strong suspicion that many more people were targeted by the News of the World while Coulson was in charge. This may be unfair, and Coulson may have nothing to fear. But the smell won't go away, and a string of impending legal cases will ensure that News International's lawyers are kept busy. In the past few weeks, a dozen MPs, including three former or current ministers, have instructed solicitors in the belief that private information about them was obtained unlawfully by the paper, and several are due to go public shortly. One sports personality is also thought to have a particularly strong case.

But perhaps most tellingly, the man who sued the News of the World for bullying is back on the scene. Last week Matt Driscoll instructed Manchester-based solicitor Charlotte Harris, who helped secure the hefty payout for Max Clifford, to ask the police if – as he believes – there is evidence from the 2007 case that his phone was hacked during his dispute with the paper. While News International executives have always said their activities involving private investigators are carried out in the public interest, any eavesdropping on Driscoll would undermine that claim.

Again, this may have nothing to do with Coulson, but the ongoing rumble of legal action would surely not be comfortable for a shiny new PM. So Cameron has a choice. Does he allow things to run, as he did with Lord Ashcroft, trusting in the emptiness of his media chief's cupboard? Or does he show his steel, thank Coulson for his hard work and encourage him to set up his own lucrative City consultancy, where he could advertise unrivalled access to the leadership?

Or does last week's report that Coulson has signed an agreement not to reveal the goings-on inside Camerot suggest the Murdoch stable might be planning to welcome him back? Stranger things have happened.