British PM, Cameron in Parliament

BBC

David Cameron has promised to set up a public inquiry into phone hacking at the News of the World, reports the BBC.

The UK prime minister said claims that the voicemail of murdered schoolgirl Milly Dowler had been hacked, with some messages deleted, were "disgusting".

But he told MPs an inquiry could not take place until police investigations were concluded.

Labour leader, Ed Miliband said Cameron was "out of touch" and an inquiry should be set up sooner.

The Prime Minister's spokeswoman told the BBC there could even be two inquiries into phone hacking - one into the police handling of the original investigation in the middle of the last decade, and one into the actions of the media.

Or, alternatively, there could be one all-encompassing inquiry, led by a judge.

Rupert Murdoch, Chairman and Chief Executive of News Corporation, the parent company of the News of the World, said allegations that staff had hacked phones and paid police were "deplorable and unacceptable".

He added that he was "committed to addressing these issues fully".

It is claimed that 13-year-old Milly Dowler's voicemail was hacked by an investigator working for the News of the World after she disappeared near her home in Surrey in 2002.

This follows allegations that dozens of politicians and celebrities, including actor Hugh Grant and former Deputy Prime Minister Lord Prescott, were also targeted.

Ed Miliband went to the Commons to demand an inquiry that he felt the prime minister would be reluctant to concede.

But David Cameron took the wind from his sails by raising the possibility not only of one inquiry but two: one into media standards, another on how the police handled the initial hacking revelations.

It is not clear when the PM decided to back an inquiry but those close to him say he saw the current allegations - in particular the hacking of murdered schoolgirl Milly Dowler's phone - as being "particularly serious".

But Cameron still faces two difficulties raised by Miliband.

First, he has been reluctant to change the timescale for the potential takeover of BSkyB by the Murdoch empire because "this is a quasi-judicial process". Expect pressure to be applied to get the whole deal referred back to the Competition Commission.

Second, Andy Coulson - David Cameron's former communications chief - has returned to prominence over allegations of police payments.

Despite today's announcement, on the explosive issue of hacking the touchpaper remains alight.

Amid noisy scenes at Prime Minister's Questions in the House of Commons, Cameron said: "We do need to have an inquiry, possibly inquiries, into what has happened.

"We are no longer talking here about politicians and celebrities. We are talking about murder victims, potentially terrorist victims, having their phones hacked into.

"It is absolutely disgusting, what has taken place, and I think everyone in this House and indeed this country will be revolted by what they have heard and what they have seen on their television screens."