David Cameron has denied he was ever lobbied on tobacco policy by his party's election strategist Lynton Crosby, insisting he was "unaware" of Crosby's role as a consultant to the world's biggest tobacco company, Philip Morris.

The government was criticised this week after plans to introduce legislation for the plain packaging of cigarettes were shelved, despite having the backing of ministers including former Health Secretary Andrew Lansley.

A year-long consultation introduced by the government had been broadly in favour of the move, which it was hoped would lead to a decline in smoking, particularly among young people.

Crosby, who was appointed strategy adviser to the Conservative Party last year, also owns the lobbying company CTF, which has advised Philip Morris Ltd in Britain since November, including providing advice on plain packaging.

The Australian-born election guru is known as the 'Wizard of Oz' after playing a key role in the election victories of former Australian Prime Minister John Howard and London mayor Boris Johnson. He famously advocated 'dog whistle' politics that stirred voters' prejudices beneath the political radar.

A spokesman for the prime minister said Cameron abandoned the plan for plain packaging after officials told him they could lead to a "legal minefield".

The spokesman added: "He believes that this would take up a huge amount of energy and effort when people want us to focus on issues like the economy and the NHS."

The U-turn caused anger among health campaigners, who immediately pointed the finger of blame at Crosby.

Deborah Arnott of the charity Action on Smoking and Health said: "David Cameron has called political lobbying the 'next big scandal waiting to happen'. Happen it has, right in 10 Downing Street, as the news breaks that Lynton Crosby has Philip Morris as a client in the UK - on the very day that the Government's plans for standard packaging of cigarettes are put on hold."

Jon Trickett, the Shadow Cabinet Office Minister, said: "On the one hand Mr Crosby's firm is advising Big Tobacco in the UK and on the other he is in Downing Street and Chequers discussing the contents of the Queen's Speech.

"We've been asking for weeks about Mr Crosby's clients - now Mr Cameron really is going to have to force him to disclose them so we can all be sure no conflicts of interest are possible."

The Tories' own backbencher Sarah Wollaston said the government had fallen victim to "hidden lobbying".

Wollaston, a GP who has campaigned for plain packaging and for increases in the price of alcohol, said: "This is the most spectacular example of hidden lobbying I can think of. I keep on being told he didn't have any conversations about it but when you've already made clear you want to scrap the whole of public health from the agenda, then that hardly matters."

Brett Cooper, director of corporate Affairs at Philip Morris Ltd, confirmed CTF acted as its consultant.

"London-based CTF advises Philip Morris Ltd in the UK on a range of matters," said Cooper.

Cameron's spokesman said the prime minister was "crystal clear that he has never been lobbied or been given advice by Lynton Crosby on the issue of plain packaging for cigarettes".