British Prime Minister David Cameron bowed to political pressure today to hold inquiries into the phone-hacking scandal and the original police investigation which failed to get to the bottom of it.
Mr Cameron told MPs that some of the work could begin before the current major police inquiry has concluded.
Cameron said the latest allegations of phone hacking were "absolutely disgusting" as he outlined details of the inquiries.
The publishers of the News of the World have said they are "very close" to discovering who commissioned the alleged hacking of Milly Dowler's phone.
News International executives have uncovered evidence about who allegedly asked private investigator Glenn Mulcaire to access the murdered schoolgirl's voicemail messages illegally after she went missing in 2002.
The development came as it emerged that families of 7/7 bombing victims have been told their phones might have been targeted for hacking.
Police have also confirmed that the parents of murdered Soham schoolgirls Holly Wells and Jessica Chapman were contacted by detectives from the News of the World hacking inquiry team.
The British Prime Minister said: "We are no longer talking here about politicians and celebrities, we are talking about murder victims, potentially terrorist victims, having their phones hacked into.
"It is absolutely disgusting, what has taken place, and I think everyone in this House and indeed this country will be revolted by what they have heard and what they have seen on their television screens."
At Prime Minister's questions, opposition leader Ed Miliband called for the takeover of BSkyB by the News of the World's parent company to be referred to the Competition Commission.
He also attacked Mr Cameron's decision to hire former News of the World editor Andy Coulson as his chief spin doctor.
Referring to the Milly Dowler allegations as he called for a public inquiry, Mr Miliband said: "That anyone could hack into her phone, listen to her family's frantic messages and delete them, giving false hope to those parents, is immoral and a disgrace."
Mr Cameron agreed, saying "we need to have an inquiry, possibly inquiries, into what has happened".
He said: "There is, and people need to know this, a major police investigation under way.
"It is one of the biggest police investigations currently under way in our country and, crucially ... it does not involve police officers who were involved in the original investigation that so clearly didn't get to the truth.
"But I do think it's important that we have inquiries, inquiries that are public, inquiries that are independent and inquiries that have public confidence.
"It seems to me there are two vital issues we need to look into. The first is the original police inquiry and why that didn't get to the bottom of what has happened.
"The second is about the behaviour of individual people and individual media organisations and ... a wider look into media practices and ethics in this country.
"Clearly ... we cannot start all that sort of inquiry immediately because you must not jeopardise the police investigation.
"But it may be possible to start some of that work earlier."
Mr Cameron said he would discuss the issue with Mr Miliband and other party leaders, along with Attorney General Dominic Grieve and the head of the civil service, Cabinet Secretary Sir Gus O'Donnell.
Mr Cameron said it was important that lessons were learned from "what has become a disgraceful episode".
The Labour leader called on Mr Cameron to appoint a senior figure, possibly a judge, to lead the inquiry, which should have the power to call witnesses under oath.
Mr Miliband said the investigation should cover "the culture and practices of the industry, the nature of regulation ... and also the relationship between the police and the media".
The UK Prime Minister said he did not think it would be possible to investigate the original police inquiry until the new one had concluded.
But "it may be possible to make a start on other elements" of the inquiry.
Turning to News Corporation's takeover of BSkyB, Mr Miliband said the bid should be referred to the Competition Commission.
"The public will react with disbelief if next week the decision is taken to go ahead with this deal at a time when News International is subject to a major criminal investigation and we do not yet know who charges will be laid against."
Mr Cameron said the Government had followed "absolutely to the letter" the correct legal processes over the BSkyB bid.
The Prime Minister told MPs Mr Miliband had yesterday said that "the issue of competition and plurality" was a separate one from the phone hacking allegations and accused him of making a u-turn on the issue.
He added: "These processes must be followed properly, including by Ofcom and it is Ofcom who have the duty to make a recommendation about 'fit and proper person'."
Mr Miliband said: "The public will not accept the idea that with this scandal engulfing the News of the World and News International that the government should in the coming days be making a decision, outside of the normal processes, for them to take control of one of the biggest media organisations in the country."
He told Mr Cameron: "I know this is difficult for you but I strongly urge you to think again and send this decision to the proper authorities."
The Prime Minister said: "In just 24-hours you have done a u-turn in order to try and look good in the Commons."
Mr Miliband said it was "not a time for technicalities" and insisted the bid should be referred.
The Prime Minister told him: "When you are dealing with the law, you have to look at the technicalities."
Mr Miliband said the phone hacking allegations "were not the actions of a rogue individual or a rogue reporter but part of a wider pattern of systematic abuses".
He repeated his call for former News of the World editor Rebekah Brooks, now News International's chief executive, to "consider her position".
Mr Cameron said: "Everyone at News International has got to ask themselves some pretty searching questions and everyone at News International is subject to what currently is one of the largest police investigations under way in this country.
"What I think is we should let the police do their work. They should follow the evidence wherever it leads and if they find people guilty of wrongdoing they should have no hesitation in making sure they are prosecuted."
Mr Miliband said he was clear that Ms Brooks "should take responsibility and stand down".