Scotland Yard announced last night that "no further investigation is required" into allegations that Rupert Murdoch's News Group newspapers conducted a massive phone-hacking campaign against thousands of phones – but the company's lawyers are braced for a rash of compensation claims from public figures who may have been targeted.
The Metropolitan Police Assistant Commissioner John Yates came to the conclusion after reviewing the case yesterday. That followed claims that the former deputy prime minister John Prescott was among the victims of a hacking operation which resulted in the jailing of Clive Goodman, former royal editor of the News of the World, and private investigator Glenn Mulcaire in 2007, for unlawfully intercepting communications in an effort to find out information about Prince William.
After being told by The Guardian that he had also been a target, Mr Prescott called for the sacking of Andy Coulson, the director of communications for the Conservative Party and a former editor of the News of the World who resigned at the time of Goodman's conviction.
A procession of senior Labour figures attempted to heap pressure on David Cameron and his aide Mr Coulson, sniffing revenge for the damage inflicted on the Government by the departure of its disgraced spin doctor Damian McBride.
Gordon Brown took time out from the G8 summit in Italy to say that the phone-bugging allegations raised "questions that are serious and will obviously have to be answered". Lord Mandelson said the public needed "a proper explanation of what went on, how it was financed, who was involved, and who authorised it", while Alastair Campbell questioned Mr Coulson's position. Tom Watson, the former Cabinet Office minister who was close to Mr McBride before his departure, also chipped in.
But Mr Yates declared last night there was no evidence that Mr Prescott's phone had been tapped. The Crown Prosecution Service does plan an "urgent" review of the evidence on phone-hacking.
In spite of the police statement, News Group still faces the possibility of paying millions in damages to victims of phone-hacking. It was claimed that Gordon Taylor, the chief executive of the Professional Footballers' Association,had been paid £700,000 in an out-of-court "gagging" settlement, after being a victim of the campaign. News Group refused to comment on the allegation.
The Guardian also alleged that News Group settled claims with two other victims, paying out £300,000, and that "two or three thousand" others, including the actors Jude Law and Gwyneth Paltrow and the chef Nigella Lawson, may have been targeted by private investigators hired by Mr Murdoch's journalists.
But Mr Yates said the police inquiry had been "solely concerned with phone tapping" and that detectives were only aware of this affecting "a much smaller pool of people".
Lawyers urge public figures worried that they have been targeted by the tapping to consider seeking damages. Nigel Tait, a media partner at Carter Ruck, said: "I would encourage those affected by the activities of the News of the World to ascertain what information is being held about them, how it was obtained, an order for destruction of the information, recordings etc – and of course to seek compensation and an undertaking or injunction against the newspaper group to prevent this happening again."
Nick Armstrong, a media lawyer with the London law firm Charles Russell, pointed out: "The damages paid to Gordon Taylor were presumably civil damages for breach of privacy, the sum involved dwarfs the £60,000 previous record privacy damages to Max Mosley."
Mr Coulson has always claimed that he knew nothing of Goodman's unlawful methods, despite their wide use. Mr Cameron insisted yesterday that his press chief's job was safe.
The House of Commons select committee on culture, media and sport will on Tuesday reopen its inquiry, set up after the Goodman trial, into how journalists at the News of the World obtained their information. John Whittingdale, the Tory MP who chairs the committee, said Mr Coulson was "almost certain" to be called to give evidence.
In an embarrassing development for News Group, the former chairman of News International, Les Hinton, who is now chief executive of Dow Jones and one of Mr Murdoch's most senior executives, is set to be summoned. Mr Hinton assured MPs in 2007 that Goodman was acting independently of senior News of the World staff and that his methods were not used by any other journalists.
Rebekah Wade, a former editor of The Sun and the News of the World, will also be asked to provide evidence. Ms Wade was recently appointed chief executive of News International.
Mr Murdoch, who has placed his son James in charge of his British media operations, will be furious at the developments. He told Bloomberg News on Wednesday evening that he had no knowledge of the alleged payment to Mr Taylor, adding that "if that had happened I would know about it".
Among the victims of News of the World stories assessing their chances of winning damages was Mark Oaten, the Liberal Democrat MP whose relationship with a male prostitute was exposed by the newspaper in 2006. He said he would demand that the Met and the Information Commissioner – whose office raided and successfully prosecuted a Hampshire private investigating firm – hand over any details pertaining to him. "But I urge caution on widespread attacks on journalism over this issue as there may be some cases where it could be justified for good investigative journalism," he said.
Tessa Jowell, who was also named as among those who had allegedly had her phone tapped, is said to be concerned over the allegations. Vanessa Feltz and Max Clifford are among those already consulting their lawyers.
News International said: "It is inappropriate to comment at this time."
The Regulation of Investigatory Powers Act creates a criminal offence of intentionally intercepting a communication in the course of its transmission on a public telecommunications system without lawful authority. The only defences are if proper authorisation has been given or there is a strong public interest in breaking the law to reveal a crime or serious wrongdoing.
Phone hacking: How the News of the World intercepted messages
When Clive Goodman decided to intercept voice messages left for the Royal Household he was less in the character of a Le Carré spy than a teenage technology geek. The News of the World's royal editor was able, with the help of private detective Glenn Mulcaire, to make phone calls from his home and office to listen to other people's messages.
Goodman and Mulcaire made 609 calls between them to the voicemails of Jamie Lowther-Pinkerton, the private secretary to Princes William and Harry, Helen Asprey, the personal secretary to the Prince of Wales, and Paddy Harverson, his communications chief.
Mulcaire also hacked into messages left for the publicist Max Clifford, the football agent Skylet Andrew, the chairman of the Professional Footballers Association Gordon Taylor, MP Simon Hughes and the model Elle Macpherson.
They were caught in 2006 after Prince William realised that information he'd told only a handful of people, notably details of a knee injury, were being made public. Members of the Royal Household also began to notice that messages on their phones they'd yet to listen to were showing up as having been heard.
Mobile telephone users can access voicemails without using their own handsets and with a little bit of knowhow it was easy for the pair to intercept the messages. When mobile users access messages remotely they type in a security code but often it is left as a default number. Mulcaire was also able to bluff telephone companies into changing PIN numbers.
It is possible for messages to be intercepted lawfully in some circumstances by government-approved officials but there was no public interest defence for the pair.
It is thought that Mr taylor must have sued under privacy rules to win his reported £700,000 settlement from News Group, as would the two other claimants who were awarded £300,000.