The day the prime minister was forced to act on phone hacking

guardian.co.uk, Nicholas Watt, James Robinson and Dan Sabbagh, Wednesday 6 July 2011

• Inquiry pledge, but David Cameron and Nick Clegg at odds

• Ministers resist delay to decision on Murdoch BSkyB takeover

David Cameron and Rebekah Brooks at a book launch in 2009.
Photograph: Dafydd Jones

David Cameron and Nick Clegg are wrangling over the membership and status of the inquiries that will be held into illegal phone hacking at the News of the World and wider questions about the future of media regulation.

The prime minister bowed to pressure to hold at least one inquiry, but is resisting calls by Clegg for a judge to take charge.

The differences between Clegg and Cameron came as the government faced calls from across the Commons and from City shareholders to delay its final decision on the proposed takeover of BSkyB by News Corporation.

Jeremy Hunt, the culture secretary, gave the provisional go-ahead for the deal last Friday, subject to a final seven-day consultation over plans to spin off Sky News as a separately listed company to allay plurality fears.

The Labour leader, Ed Miliband, took the momentous step of turning against Rupert Murdoch's empire, calling for the resignation of News International's chief executive, Rebekah Brooks, and demanding the BSkyB decision be referred to the Competition Commission.

"The public will react with disbelief if next week the decision is taken to go ahead with this deal at a time when News International is subject to a major criminal investigation and we do not yet know who charges will be laid against," he said.

Simon Hughes, the Liberal Democrat deputy leader, said he would ask Ofcom to exercise its right to assess whether the directors of News Corp were "fit and proper" to take full control of BSkyB.

"Ofcom ... has a statutory obligation to consider at any time who is appropriate to hold a broadcasting licence. The message from this House must be that we want it actively to consider that obligation.

"If it comes to the view that the future owners of BSkyB are inappropriate, it should rule accordingly, which would mean that the BSkyB merger could not go ahead."

Nicholas Soames, the former Tory defence minister, called for a pause in the BSkyB bid on the grounds of "serious criminality on the part of some people at News International". Soames is listened to with care because he is close to the Prince of Wales who was angered when Prince William's phone was hacked.

Several City shareholders called for Hunt to delay his final decision while investigations into the operations of the News of the World were ongoing. Robert Talbut, chief investment officer of Royal London Asset Management said: "There are issues here that go beyond a simple financial transaction."

Another investor, speaking on the basis of anonymity said: "Hunt should hold fire because we are faced with a further concentration of media power in News Corp's hands at a time when there are allegations of malpractice within one of its major subsidiaries."

Government sources insisted it was wrong to talk about pausing the process. They said that Hunt would consider submissions made during the consultation period and would make a decision in consultation with Ofcom and the OFT.

Shares in News Corp and BSkyB fell as the News of the World phone-hacking scandal put Murdoch and his bid to take control of the broadcaster under scrutiny. News Corp shares fell by 5% at one stage on Wall Street, to $17.17. BSkyB shares in London closed 2.1% lower at 827p.

Murdoch denounced as "deplorable and unacceptable" the revelation in the Guardian earlier this week that the News of the World hacked into the telephone of Milly Dowler after she disappeared.

But Murdoch offered support for Brooks, who was NoW editor at the time of the schoolgirl's murder.

"I have made clear that our company must fully and proactively co-operate with the police in all investigations and that is exactly what News International has been doing and will continue to do under Rebekah Brooks's leadership."

Cameron announced the inquiry or inquiries would be held after consulting Clegg on his return from Afghanistan. It is expected one inquiry will examine how phone hacking was started and tolerated, while a second will examine the future of media regulation and the future of the Press Complaints Commission.

But there were differences with Clegg over whether a judge would be involved. A Downing Street source said: "We do not have to have a judge-led inquiry to make it effective."

But Clegg insisted a judge would have to be involved in at least one inquiry. In an email to Lib Dem members, he said: "The inquiries must be independent, open, able to access all information and call witnesses, and that crucially the inquiry dealing with legal issues (eg relationship between police and media) must be presided over by a judge."

One Lib Dem source said: "There is no point in having an enquiry if it does not have teeth. We do not want a talking shop. Unless you have a judge you can't deal with the crunchy bit."

The scale of the anger at News International across the Commons was highlighted when Tom Watson, a former Labour minister, accused it of entering the "criminal underworld" by "paying people to interfere with police officers and were doing so on behalf of known criminals".

He said James Murdoch, the tycoon's son, had "personally, without board approval, authorised money to be paid by his company to silence people who had been hacked and to cover up criminal behaviour within his organisation".

John Whittingdale, the Tory chairman of the Commons culture select committee, named a series of News International executives who had told his committee that only one reporter was responsible for phone hacking while police possessed evidence of widespread illegality.

News International is planning to relieve the pressure on Brooks, by claiming she was on holiday when a mobile phone belonging to Dowler was hacked into.

The Guardian understands that the company has established that Brooks, News of the World editor from May 2000 until January 2003, was on holiday in Italy when the paper ran a story which referred to a message that had been left on the teenager's phone.

That is likely to focus attention on Andy Coulson, who was Brooks's deputy at the time, and would normally have edited the paper in her absence.

Procter & Gamble, Britain's biggest advertiser, plus O2, Vauxhall, Butlins and Virgin Holidays joined Ford in pulling ads from this weekend's News of the World. P&G, which spent almost £1.5m in the News of the World in the last year, said it shared the "growing concern" over the phone-hacking allegations.

The Press Complaints Commission said that it "no longer stands by" a 2009 report which it concluded there was no evidence that phone hacking was carried out by journalists other than Clive Goodman.

The chancellor, George Osborne, was notified by the Metropolitan police that his name and home phone number appeared in notes kept by Glenn Mulcaire and Goodman.

News Corp Chief Executive Rupert Murdoch attends
The Times CEO summit at the Savoy Hotel in London June 21, 2011.
(Credit: Reuters/Ben Gurr/Pool)

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