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The home secretary has admitted he used "unparliamentary" language to describe a Labour MP, a close source has said.
James Cleverly had denied claims he called the Stockton North constituency a swearword in response to a question in the Commons from Alex Cunningham.
The source said on Thursday: "James made a comment. He called Alex Cunningham a shit MP. He apologises for unparliamentary language."
Mr Cunningham said it "simply was not true", adding he "did not believe him".
He had alleged the swearword was used during Prime Minister's Questions on Wednesday.
Mr Cunningham had asked: "Why are 34% of children in my constituency living in poverty?"
Making a point of order in the Commons later that day, he said: "Before the prime minister answered, the home secretary chose to add in his pennyworth.
"He was seen and heard to say 'because it's a shithole'.
"I know he is denying being the culprit, but the audio is clear and has been checked, and checked, and checked again."
In footage of the exchange in the Commons, it was unclear where the remarks came from as there was no shot of Mr Cleverly mouthing the words.
'I don't believe it'
The Conservative Party chairman and Durham North West MP Richard Holden had earlier said he was "sure it wasn't said by any Conservative MP".
The source close to Mr Cleverly added: "As was made clear yesterday, he would never criticise Stockton. He's campaigned in Stockton and is clear that it is a great place."
Mr Cunningham told the BBC: "This is simply not true. I don't believe it. Two syllables were clearly heard.
"'MP' doesn't fit. He's moved today but needs to go the full distance and admit that he said the words."
Commons Deputy Speaker Dame Eleanor Laing said it was her understanding that Speaker Sir Lindsay Hoyle "didn't hear any remark of the kind from the chair at the time when the honourable gentleman was asking his question".
"But I think we all know that it's very difficult in the noisy atmosphere of Prime Minister's Questions to discern exactly what someone says.
"So I can make no judgment here from the chair as to what was or wasn't said."
Earlier Lord Houchen of High Leven had demanded that Mr Cleverly apologised "for dragging Stockton's name through the mud".
Lord Houchen is the Conservative mayor for Tees Valley, which includes Stockton, and was ennobled in Boris Johnson's resignation honours list.
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