FIVE journalists and newspaper executives suspected of involvement in the News of the World phone-hacking scandal are expected to be arrested within days amid a growing political and public outcry.

News International said yesterday that it was 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.

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.

Rupert Murdoch gave his backing to Rebekah Brooks, the former Editor of the News of the World 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.

But the PCC said that its chairman, Baroness Buscombe, would immediately begin a review of press regulation, including its own independence and the sanctions available.

The watchdog also withdrew its 2009 report, which cleared the News of the World of widespread phone hacking, adding that recent revelations “undermined assurances” that it had received from News International.

Mr Cameron resisted demands by MPs to halt News Corporation’s bid for BSkyB, insisting that the Government had followed “absolutely to the letter” the correct legal process.

Ed Richards, chief executive of the media regulator Ofcom, said that there was scope to investigate whether the holder of a broadcasting licence was “fit and proper” but that those powers do not relate to the proposed acquisition.

The police’s handling of the original investigation faces further scrutiny by MPs next week. Andy Hayman, the former Assistant Commissioner in charge of that inquiry, and his then deputy were yesterday called to give further evidence about the investigation to the Home Affairs Select Committee.

Colin Myler, the current Editor of the News of the World, wrote to staff yesterday saying if the allegations were true it would amount “to the must unimaginable breach of journalistic ethics”.

A succession of companies withdrew their advertising from the paper amid growing signs that the backlash against the newspaper was damaging its parent company’s business interests.