The former managing editor of News of the World authorised payments to private investigator Glenn Mulcaire after he had been arrested on suspicion of phone hacking, a court heard.

The Old Bailey jury was told Kuttner, 73, of Broomhill Walk, Woodford Green, approved a fee for ‘research’ five days after Glenn Mulcaire was held in 2006.

Mulcaire was later jailed, along with the newspaper's royal editor, Clive Goodman, for phone hacking.

Kuttner is on trial along with the former News International chief executive Rebekah Brooks, ex-News of the World editor Andy Coulson and others charged with conspiring to hack phones between October 3 2000 and August 9 2006.

The prosecution said a raft of cost-cutting measures were introduced at the same time as the Sunday tabloid signed a £92,000 a year contract with Mulcaire to provide ‘exclusive services’ in 2001.

Kuttner is said to have proposed cancelling the News of the World Christmas party, which had a budget of £40,000, and cutting the newsdesk’s budget.

Kuttner has been excused from attending the trial every day due to ill health and was not in court yesterday.

He resigned from the newspaper in July 2009 before he was arrested and then bailed in August 2011.

He was formally charged in July 2012.

The defendants deny all charges against them.

The trial continues.