Prime Minister David Cameron's hopes of limiting the political damage from the telephone-hacking affair tumbled yesterday as ministers were urged to order an independent inquiry into Metropolitan Police actions.
Despite the resignation of Andy Coulson as the Downing St director of communications, the spotlight was thrown back on to Cameron's links with Rupert Murdoch's empire.
The Independent has learnt that James Murdoch, son of Rupert and chairman of News Corp in Europe and Asia, attended a private dinner with Cameron just days after the Prime Minister stripped Vince Cable, the Liberal Democrat Business Secretary, of responsibility for the crucial decision on whether News Corp should be allowed to buy the 61 per cent of BSkyB it does not already own.
Cameron and his wife Samantha were at a dinner at the home of Rebekah Brooks, chief executive of News International, in Oxfordshire.
Aides had previously argued Brooks was a constituent of Cameron, who represents Witney in Oxfordshire.
The disclosure that James Murdoch was present provoked calls by Labour MPs for the Cabinet Secretary to intervene, amid claims it raised questions about Cameron's judgment.
The takeover decision is now in the hands of Jeremy Hunt, the Tory Culture Secretary. (Cable lost responsibility for media regulation after telling undercover reporters he had "declared war" on Rupert Murdoch.)
Coulson quit as editor of News of the World in 2007 after the paper's royal reporter admitted hacking royal phones. Although he denied knowledge of the practice, he quit No 10 on Sunday, admitting he could not do his Downing St job properly.
Senior Tories had hoped Coulson's departure would turn the controversy into a media rather than political affair. Those hopes were dashed when it was revealed former Prime Minister Gordon Brown had asked the Metropolitan Police if he had been the target of phone hacking while he was Chancellor of the Exchequer.
Sources close to Brown now believe the practice may have extended to two other Murdoch papers - the Sun and the Sunday Times - and may have enabled his papers to obtain documents as well as to listen to voicemail.
Former Brown aides said he was "very worked up" about hacking. He has a long list of alleged victims and urged them to go to the police.
There is now intense scrutiny of the police's limited original investigation into the hacking affair, with claims of a cover-up. Although the Crown Prosecution Service is reviewing all the evidence, and will hold talks with Scotland Yard this week, there are demands for this investigation to be handed to a different police force or to the Inspectorate of Constabulary.
Paul Farrelly, a Labour member of the Commons Culture, Media and Sport Select Committee, wants Justice Secretary Kenneth Clarke and Attorney-General Dominic Grieve to ensure an independent review.
John Whittingdale, Tory chairman of the Culture Committee, said it would be extraordinary if the Chancellor's phone had been hacked into, and that had not been fully investigated.
Chris Huhne, a Liberal Democrat Cabinet minister, said it was implausible to claim the practice was confined to "one rogue reporter" at the News of the World.
Mark Lewis, a lawyer representing celebrities who believed they too were victims of phone hacking, is preparing cases against other Fleet St titles.