Five News Of The World newspaper executives and journalists believed to have been part of the paper's phone-hacking scandal are expected to be arrested within days.

News International is now close to identifying who authorised a private investigator to listen to messages on the phone of the murdered schoolgirl Milly Dowler and people involved in other high-profile stories.

Prime minister David Cameron promised MPs that he would order a public inquiry into the allegations.

There could be one inquiry into the police handling of the original investigation and another into the actions of the media.

News International chairman Rupert Murdoch gave his backing to Rebekah Brooks, the former News of the World editor and now chief executive of News International, which also publishes The Times.

The News Corporation chairman described allegations that staff had hacked phones and paid police as "deplorable and unacceptable". He said that the company would co-operate fully with the police in all investigations "and will continue to do so under Rebekah Brooks's leadership".

News International announced that documents exonerated Ms Brooks from authorising the investigator to hack into Milly's mobile telephone, but refused to discuss the position of her former deputy at the paper, Andy Coulson, or any other person.

In a day of dramatic developments:

George Osborne, the Chancellor, was told by Scotland Yard detectives that his name and home phone number appeared in notes kept by Glenn Mulcaire, the private investigator who worked for the News of the World.

There was no suggestion that Mr Osborne, who was Shadow Chancellor at the time, had his phone hacked into;

The Press Complaints Commission (PCC) said it would immediately review all aspects of current press regulation;

MPs demanded that the Government block News Corporation's takeover of BSkyB.

Families of victims of the July 7 terror attacks, who have been told by police that they may have been targeted by Mr Mulcaire, expressed outrage as the list of those who had been hacked continued to grow.

It was also claimed that phones owned by relatives of British soldiers killed in Iraq and Afghanistan could have been hacked by the News of the World.

Dominic Grieve, the Attorney-General, said that public inquiries would not begin until the completion of any prosecutions arising out of the police investigation, a timescale that could postpone them for years.