Liverpool is now likely to team up with Tower Hamlets in lodging an official complaint about the story.
But in a carefully-worded response, Sebastian Hamilton, deputy news editor of the Sunday Telegraph, said: "We had a letter last week from Liverpool and Tower Hamlets about this article which they say is untrue.
"Our story was based on an onthe-record interview with Deena Taberner, the assistant catering manager for Liverpool City Council. We asked her what the plans were for catering Liverpool schools over Easter and in particular which schools would be providing hot cross buns, given their potential to cause offence.
"She replied 'We don't celebrate religious festivals at all. We are very careful not to upset anybody.
"'We will not be serving hot cross buns and we will not be doing an Easter theme day'.
"We asked specifically whether religious sensibilities played a part in not serving hot cross buns. She replied that they 'had the potential to offend'.
"Our article was based directly on that response and in all the communication we have had with Liverpool City Council they have not contested the accuracy or veracity of our quotes.
"Finally, the one thing they have never said is that the children of Liverpool, like many across the rest of Britain, will be offered hot cross buns this Easter."
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