A former spokesman for British Prime Minister David Cameron has been arrested and freed on bail until October over the phone hacking scandal at a tabloid newspaper that has sparked a public furore in the UK.
Andy Coulson, who quit as editor of the News of the World in 2007 over previous phone hacking revelations and resigned his Downing Street role earlier this year, was arrested by police on Friday morning.
The arrest followed fresh hacking allegations at the UK's largest-selling Sunday newspaper.
The News of the World's former royal editor Clive Goodman was also arrested over alleged payments to police, a police source said.
Police were also searching the offices of a second British tabloid newspaper, the Daily Star, Reuters news agency reported.
Cameron, who faces criticism over his judgment in hiring Coulson, on Friday ordered a public inquiry into allegations of press corruption and called for a new system of press regulation.
"What people really want to know is what happened and how it happened ... I believe we need a new system entirely," he said.
"It will be for the inquiry to recommend what the system should be like but my starting presumption is that it should be truly independent."
Cameron said the system should be "independent from the press, so that the public will know that newspapers will never again be solely responsible for policing themselves but vitally independent from government".
This, he added, would enable the public to know that "politicians are not trying to control or muzzle the press that must be free to hold politicians to account".
Ed Miliband, the leader of the opposition Labour Party, pressed for a similar change, saying: "We need wholesale reform of our system of press regulation."
Al Jazeera's Lawrence Lee, reporting from London, said: "The British political class has confessed to their parties having far too cosy relationships with journalists, [and agree that it is] very bad for democracy because the public at large are asked to believe what's reported."
Al Jazeera's Inside Story explores the ethics of tabloids
The developments follow allegations that News of the World listened in on and deleted some voicemails sent to victims and relatives involved in some of the country's most notorious crimes, which has led to four separate inquiries.
The paper is also said to have hacked into the phones of relatives of UK servicemen killed in Iraq and Afghanistan.
Announcing a judicial inquiry into the culture of phone tapping at all news agencies, Cameron said he took "full responsibility" for hiring Coulson as his communications director.
Coulson, who quit the News of the World in 2007 saying he took "full responsibility" for previous phone hacking activities at the paper, resigned his position in Cameron's office in January as the latest phone hacking revelations at the paper gained momentum.
Cameron's friendship with another former News of the World editor, Rebekah Brooks, now chief executive at the paper's parent company News International, is also prompting serious questions.
The scandal has also raised concerns about close ties between Cameron's government and Rupert Murdoch's News Corp, which owns News International, over the media giant's proposed takeover of British satellite broadcaster BSkyB.
The BBC reported on Friday that Ofcom, the UK's media regulator, would investigate News Corp's proposed bid in the light of the News of the World affair.
News Corp said on Thursday that Sunday's edition of News of the World would be the last in the tabloid's 168-year history.
"News International today announces that this Sunday, 10 July 2011, will be the last issue of the News of the World," James Murdoch, deputy chief operating officer of News Corp, said.
He said the paper had done good things but "the good things have been sullied by behaviour that was wrong".
"Indeed, if recent allegations are true, it was inhuman and has no place in our company. The News of the World is in the business of holding others to account. But it failed when it came to itself".
Source: Al Jazeera and agencies