Police arrested David Cameron’s ex-media chief Andy Coulson and a former royal reporter over Britain’s tabloid phone hacking row yesterday as the Prime Minister promised urgent inquiries into the spiralling scandal.

Mr Coulson, the former editor of Rupert Murdoch’s News of the World tabloid, which is to shut tomorrow, left Lewisham police station in southeast London later yesterday and told a scrum of waiting reporters that he had attended the police station voluntarily, adding: 'There is an awful lot I would like to say, but I can't at this time.'

He was bailed to return to a London police station in October.

Mr Cameron looked rattled during the toughest press conference of his year in power, but he defended his decision to hire Mr Coulson.

He admitted the scandal went to the heart of the British establishment, saying: “The truth is, we have all been in this together - the press, politicians and leaders of all parties, and yes, that includes me.”

Mr Cameron said he gave Mr Coulson a “second chance” after he quit the News of the World in 2007 when two people were jailed over hacking. Mr Coulson then resigned from Mr Cameron’s Downing Street office in January, citing pressure over the claims. “The decision to hire him was mine and mine alone, and I take full responsibility for it,” Mr Cameron said, adding however that Mr Coulson “became a friend and is a friend”. Mr Murdoch caused astonishment on Thursday when he killed off the 168-year-old News of the World, Britain’s biggest selling Sunday paper, amid claims that it hacked the voicemails of a murdered girl and the families of dead soldiers. Mr Cameron announced that he would set up a public inquiry led by a judge into the furore around the paper, as well as a second inquiry into the way in which the British press is regulated.

“These are the questions that need answering: Why did the first police investigation fail so abysmally? What exactly was going on at the News of the World? And what was going on at other newspapers?” he said.

Minutes after the Prime Minister spoke, London’s Metropolitan Police arrested the 43-year-old Mr Coulson who was questioned for nine hours over allegations of corruption and phone hacking.

The corruption allegations refer to alleged improper payments to police officers by the news paper when Mr Coulson was editor of Britain’s biggest-selling Sunday newspaper.

Police said they had also re-arrested Clive Goodman yesterday, the News of the World’s former royal editor, one of the two men who were jailed in 2007 for hacking the voicemails of Princes William and Harry.

Police said they had also raided the offices of another British tabloid, the Daily Star Sunday, where Mr Goodman had worked as a freelance reporter over the past year. In a statement, the newspaper said officers had requested computer material linked to Mr Goodman.

Meanwhile, Rebekah Brooks, News International’s CEO, told the 200 sacked staff at the News of the World office yesterday that she felt 'betrayed' and that she would try to find them jobs across the company, Sky News reported. She also said that worse revelations are on the way and that “in a year’s time you would know why the newspaper closed”.

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