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A video obtained by ITV shows senior No 10 staff joking about holding a Christmas party - a party the government had denied ever happened.
The PM's then press secretary Allegra Stratton is asked by colleagues about reports of a party, as they rehearse a news conference in December last year.
In jokey exchanges, she says: "This fictional party was a business meeting and it was not socially distanced."
Downing Street continues to insist no party took place.
The mock news conference took place in the government's new high tech briefing room at 9 Downing Street, on Tuesday 22 December, without members of the media present.
The rehearsal took place four days after the Christmas party, on 18 December.
In the clip, leaked to ITV , Ms Stratton responds to questions from colleagues pretending to be journalists in a playful tone.
Asked about the party she says "I went home", while one aide jokes that "it wasn't a party, it was cheese and wine."
"Is cheese and wine all right," asks Ms Stratton, before adding: "This fictional party was a business meeting and it was not socially distanced."
In response to the clip, No 10 said: "There was no Christmas party. Covid rules have been followed at all times."
Labour leader Keir Starmer said: "The government broke the rules, they partied and now they're laughing."
He accused the prime minister of "taking the public for fools" and said he should "tell the truth and apologise".
The SNP's Westminster leader, Ian Blackford, said the prime minister "must remove himself from office immediately" if it was true there was a Downing Street Christmas party that was not socially distanced last year.
Mr Blackford said the video was "damning and leaves the prime minister with a lot to answer for" while "every individual up and down the country was told to stay at home in order to protect the NHS".
On the No 10 position, a government source told BBC political editor Laura Kuenssberg : "This line won't hold. As bad as Cummings road trip for sure."
A senior Conservative told her the Owen Paterson affair showed the prime minister "didn't think the rules applied to his friends".
"This video demonstrates that's widely shared in No 10 by senior political advisers. People prevented by the gov[ernment] from seeing loved ones at end of their life will conclude they were taken for fools".
And senior Conservative Charles Walker said: "The No 10 party means that any future lockdowns will be advisory, whatever the law says".
The government has been under pressure about the party since it was first reported by the Daily Mirror last week.
The Mirror said last year's official Downing Street Christmas party was cancelled due to restrictions, but staff held an unofficial gathering.
Sources who attended later told the BBC that party games were played, food and drink were served, the party went on past midnight and that "several dozen" people attended.
Asked about the party, Boris Johnson had said he is "satisfied" no Covid rules were broken.
But the Covid restrictions operating at the time banned such get-togethers.
No 10 has refused to explain how party-goers complied, despite days of questioning by reporters.
Following the leak of the clip, one Conservative MP told the BBC: "This story is incredibly frustrating as we don't have official details either.
"I'm getting messages from my constituents, accusing me of being at the party... It's very difficult to respond in any detail because I don't have any and wasn't there.
"I'm not convinced this video moves things on, but it's the speculation that kills us."
Another said: "We are all battening down the hatches... it's indefensible".
What were the rules on office parties in December 2020?
Any party at Downing Street would have breached the government's guidelines at the time.
Its guidance for the Christmas period specifically said: "Although there are exemptions for work purposes, you must not have a work Christmas lunch or party, where that is a primarily social activity and is not otherwise permitted by the rules in your tier."
The other question is whether it would have been illegal.
London at the time was in Tier 3 and the law banned gatherings of two or more people indoors unless it was "reasonably necessary" for work.
There was also a specific prohibition on organising an indoor gathering of more than 30 people.
But there may have theoretically been a loophole for government buildings like 10 Downing Street because of the 1984 legislation used to bring in the tier system, according to Adam Wagner - a barrister at Doughty Street Chambers and an expert on Covid regulations.
Another barrister, Charles Holland from Trinity Chambers, tweeted that there would have needed to be an agreement with Westminster City Council for the regulations to apply in Downing Street.
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