British Prime Minister David Cameron Thursday dismissed claims that his party made covert deals with Rupert Murdoch's media empire as he faced a grilling at Britain's press ethics inquiry.

In eagerly awaited testimony to the Leveson Inquiry, Cameron admitted however that British politicians had become too close to newspapers and said the relationship needed to be better regulated.

Cameron was expected to face questioning over his links to Murdoch and two of the media baron's top lieutenants, who have been arrested over the phone-hacking scandal at Murdoch's now-defunct News of the World tabloid.

"The idea of overt deals is nonsense," Cameron said, responding to suggestions that his Conservative party treated Murdoch's News Corp empire softly in exchange for positive coverage.

"I also don't believe in this theory that there was also a nod and a wink and a covert agreement," he added.

Cameron set up the Leveson inquiry in July last year after the News of the World was shut down in the wake of a public outcry when it emerged the tabloid had hacked into the phone of a murdered schoolgirl.

As the scandal grew, the Conservative-led government's own links to the Murdoch empire came under scrutiny, particularly as it was responsible for deciding on a News Corp takeover bid for pay-TV giant BSkyB.

Cameron was put on the spot over a text message received from one of Rupert Murdoch's closest aides saying they were "in this together."

"I am so rooting for you tomorrow not just as a personal friend but because professionally we're definitely in this together," said the text from Rebekah Brooks, the former head of Murdoch's British newspaper wing and editor of the News of the World.

The text was sent a day before Cameron, who was then opposition leader, was due to address the annual conference of his Conservative party in October 2009. Brooks was chief executive of News International at the time.

"Speech of your life? Yes he Cam!" the text continued, punning on his surname and on US President Barack Obama's 2008 election slogan.

The text also suggested that Cameron - who knew Brooks' husband Charlie from their schooldays at the elite Eton College - have a "country supper" to discuss an "issue" with the Murdoch-owned Times newspaper.

The inquiry heard in May that Cameron signed texts to Brooks "LOL", thinking it stood for "lots of love."