The Daily Telegraph could be paying out the £1.25m in costs and damages of £150,000 itself after it lost a libel case brought against it by MP George Galloway.

One source suggested that the Daily Telegraph self-insured its professional indemnity cover.

Sources said the complexity of libel cases meant that national newspapers often retained the risk themselves.

In April 2003, the newspaper published a story claiming Galloway was on the payroll of Saddam Hussein while he was in power.

The judge in the case said the accusations were "seriously defamatory" of Galloway. The newspaper declined to comment.