The explosive story about phone hacking, and now police bribery, involving the News of the World and Rupert Murdoch’s News International is fast escalating into a political crisis for the Coalition government.

Without rehashing all the details here are the most salient facts:

–       NoW journalists systematically used private investigators to ‘hack’ the phones of people they wanted stories about, including friends and relatives of murdered children and victims of the 7/7 terrorist attacks

–       NoW paid large sums of money – “tens of thousands of pounds” – to police officers

–       The Metropolitan Police singularly failed to follow up on the phone hacking story, despite having thousands of pages of evidence

So why is this a crisis for the Government?

First, because they have to decide if News International should be allowed to take over satellite broadcaster BSkyB. Squirm as they might, this is their decision and – and whatever the technicalities – the public perception will be of them allowing their chums in NI to get what they want if the BskyB deal goes ahead. Moreover there are well known divisions within the Coalition over this issue, and now it is becoming so toxic the Lib Dems will almost certainly try to distance themselves from it.

Second, the PM employed former NoW Editor Andy Coulson as his Director of Communications. Coulson is now allegedly being accused of authorising illegal payments to serving police officers – a criminal offence. If, as seems entirely possible, Coulson ends up being charged it will call David Cameron’s judgement into account even more than it has already.

Third, this whole saga reflects badly on both the last Labour government, who also cuddled up to NI, but especially the current Prime Minister, who has a cosy relationship with central NI figures including of course Andy Coulson and Rebekah Brooks.

Fourth, the Government now has to urgently address the issue of press regulation – the independent Press Complaints Commission (PCC) has clearly been shown to be completely useless and the clamour for proper regulation – probably through legislation – will be immense.

Finally, if there have been payments of “tens of thousands of pounds” to police officers the Government cannot stand idly by and allow the force involved – the Metropolitan Police – to continue to run both the investigation into NoW/NI phone hacking and now bribery of police officers too.

Nor is this issue going to go away quickly. The revelations about hacking of victims relatives phones and police bribery have escalated the issue and now it is clear that people in and around NoW/NI are starting to break ranks to try to save their own skins. The revelation last night that NI had passed over to the police emails allegedly showing Andy Coulson had authorised bribes was clearly aimed at deflecting attention from current NI CEO Rebekah Brooks. (The emails had actually been handed over weeks ago). Now Coulson has been hung out to dry by News International, how long before he and others start to spill the beans?

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PS this was written this morning before PMQs and the debate in the House of Commons. The Governments decision to agree to an inquiry is a step forward, but they are also trying to push back until after the police investigation and any court cases are over, which could be 2-3 years. As Barrister Geoffrey Robinson has pointed out, there is nothing legal to stop them doing it now.