David Cameron has said he is "extremely sorry" for the furore his appointment of Andy Coulson as his communications chief has caused.

In a Commons statement, the Prime Minister said that with the benefit of "20:20 hindsight" he would not have given the former News of the World editor the job, and added that he would owe a "profound apology" if it turned out that the assurances Mr Coulson had given him that he was not involved in phone hacking had turned out to be false.

Mr Cameron said that if Mr Coulson had lied about phone hacking at his time at the News of the World then he should face "severe" criminal charges. He added: "If it turns out I have been lied to that would be a moment for a profound apology, and in that event I can tell you I will not fall short."

Labour leader Ed Miliband dismissed Mr Cameron's words on Mr Coulson as "not enough", and claimed there had been at least five occasions where his office ignored damning information about the former News of the World editor.

The Labour leader went on: "This cannot be put down to gross incompetence. It was a deliberate attempt to hide from the facts about Mr Coulson. The Prime Minister was caught in a tragic conflict of loyalty between the standards of integrity that people should expect of him and his staff and his personal allegiance to Mr Coulson. He made the wrong choice."

The Prime Minister was also asked by Labour former culture secretary Ben Bradshaw whether he had ever discussed Mr Murdoch's BSkyB bid with News International executives, including Rebekah Brooks.

Mr Cameron said: "As Rebekah Brooks said yesterday in Parliament, there was never a conversation that could have been held... Perhaps you will now be transparent about all the contacts you have had with News International over many years."

Labour veteran Dennis Skinner later repeated Mr Bradshaw's question. To uproar from the Opposition benches, the Prime Minister replied: "I never had one inappropriate conversation."

In his statement, Mr Cameron said he is widening the remit of the judicial inquiry set up under Lord Justice Leveson. He said it will now look at broadcasters and social media, as well as the press, if there was any evidence they had been involved in criminal activities. It will consider the individual conduct of press, police and politicians as well as the relationship between them. Mr Cameron said the inquiry will begin work immediately and will deliver its first report within 12 months.

Earlier, Buckingham Palace had strongly rejected "outrageous" claims by a Labour MP that officials tried to warn Mr Cameron against appointing former News of the World editor Mr Coulson as his director of communications. The Palace issued a formal denial after Chris Bryant claimed senior figures had sought to relay their concerns directly to No 10.