BSkyB bid dropped amid 'firestorm'

Media tycoon Rupert Murdoch today withdrew News Corporation's £8 billion bid to take over satellite broadcaster BSkyB in a dramatic response to the "firestorm" of public and political anger over phone hacking at the News of the World.

The move came shortly after Prime Minister David Cameron appointed senior judge Lord Justice Leveson to head a public inquiry into the hacking allegations, and just hours before MPs were expected overwhelmingly to back a Labour motion condemning the takeover plans.

Mr Cameron said News Corp had made "the right decision" in dropping its bid to buy the 61% share in BSkyB which it did not already own, while his deputy Nick Clegg described it as "the decent and sensible thing to do".

Labour leader Ed Miliband hailed the development as "a victory for people up and down this country who have been appalled by the revelations of the phone hacking scandal and the failure of News International to take responsibility".

The collapse of the takeover bid was announced by News Corp deputy chairman Chase Carey, who said it had "become clear that it is too difficult to progress in this climate". The company would remain "a committed long-term shareholder in BSkyB".

Shares in BSkyB rallied slightly after the announcement from a low of 683.5p earlier today, but remained significantly below the 850p they achieved earlier this month on hopes of a deal with News Corp.

BSkyB chief executive Jeremy Darroch said the broadcaster remained "very confident in the broadly based growth opportunity" for its business.

Downing Street said that the Prime Minister received no advance notice of the announcement, which came less than two hours after his statement to MPs setting out the terms of Lord Leveson's inquiry.

Welcoming the development, Mr Cameron said it was time to get on with the inquiry and with the continuing police investigation into claims that News of the World reporters illegally eavesdropped on private phone messages.

"I think this is the right decision," said the Prime Minister. "I've been saying that this company clearly needs to sort out the problems there are at News International, at the News of the World. That must be the priority, not takeovers."

Lord Leveson's inquiry will be able to summon newspaper proprietors, journalists, police and politicians to give evidence on oath and in public. It will have the same powers as the High Court to require people to give evidence, though it was not immediately clear how this will affect non-UK nationals such as News Corp chairman Mr Murdoch and his son James, the company's chief executive in Europe.

After flying into London for a public display of support for embattled News International chief executive Rebekah Brooks earlier this week, Mr Murdoch senior was thought to be returning to the US today.

Setting out the inquiry's remit in the House of Commons, Mr Cameron said that those found to be responsible for wrongdoing at the News of the World should be barred from future involvement in the media industry.

"The people involved - whether they were directly responsible for the wrongdoing, sanctioned it, or covered it up, however high or low they go - must not only be brought to justice, they must also have no future role in the running of a media company in our country," he said.

Mr Cameron made clear that this could include former News of the World editor Andy Coulson, who he appointed director of communications at 10 Downing Street last year.

Mr Coulson had given assurances, not only to him but also to the police, a parliamentary committee and under oath to a court of law that he was not involved in criminality at the paper, said the Prime Minister.

"If it turns out he lied, it won't just be that he shouldn't have been in government, it will be that he should be prosecuted," said the Prime Minister.

Mr Cameron today met with the family of murdered 13-year-old Milly Dowler, whose mobile phone was illicitly accessed and voicemail messages deleted shortly after her abduction. It was the revelation nine days ago that Milly's phone was hacked that ignited the furious row over press standards.

The Prime Minister told MPs: "There is a firestorm that is engulfing parts of the media, parts of the police and indeed our political system's ability to respond.

"What we must do in the coming days and weeks is think above all of the victims, like the Dowler family... to make doubly sure that we get to the bottom of this and that we prosecute those who are responsible."

Former prime minister Gordon Brown, whose claim that The Sun illegally hacked his phone to discover details of his baby son's medical condition has today been fiercely denied by the newspaper, made a rare appearance in the Commons to take part in today's debate.

Calling on MPs to defend "the basic liberties of our citizens", Mr Brown said: "It is my judgment that we should reform, but never undermine, something so fundamental to our liberty - our twin commitments to the freedom of the individual and to a free press".

Lord Leveson's inquiry - which replaces Mr Cameron's initial proposal for two separate probes - will be conducted in two parts.

The first, into the culture, ethics and regulation of the media, will be completed within 12 months, while the second, into the phone hacking allegations, the shortcomings of the original police inquiry and claims of corrupt relations between police and the press, is expected to take much longer.

The judge is expected to have to wait until the completion of police inquiries, which could take years, before questioning witnesses who may face criminal charges.

Lord Leveson said work on the practical arrangements for the inquiry would begin "immediately" so that the first part could begin "as soon as possible". He hoped to be able to provide an update by the end of the month.

"The Inquiry must balance the desire for a robustly free press with the rights of the individual while, at the same time, ensuring that critical relationships between the press, Parliament, the Government and the police are maintained," he said in a statement.

"The press provides an essential check on all aspects of public life. That is why any failure within the media affects all of us. At the heart of this Inquiry, therefore, may be one simple question: who guards the guardians?"

Mr Cameron also announced plans to change the ministerial code to require ministers to record and publish details of their meetings with media proprietors and executives. And he said that Metropolitan Police Commissioner Sir Paul Stephenson was planning to appoint a senior figure to advise him on his officers' links with the press.