Britain's biggest selling newspaper, part of Rupert Murdoch's global media empire, has been engulfed in a 'phone hacking' scandal involving a murdered teenage girl. Journalists at the News of the World hacked into the phone while a massive police hunt for the girl was still underway. As Richard Bestic reports from London, the claims have sparked political and public outrage.

Members of the British Parliament have been angrily voicing their condemnation.

Political parties united in their shock at the actions News Corporation’s flaghship UK tabloid.

The Prime Minister has announced a public inquiry into the way the UK Press operates and a second inquiry into police bribes.

Phone hacking at the News of the World first came to light six years ago when it revealed a member of the British Royal family was targeted.

Police investigations revealed that the practice was widespread, victims including celebrities and at least one government minister.

Now it's just got worse.

Thirteen year-old Milly Dowler was abducted and murdered nine years ago.

Before her body was found News of the World journalists hacked her phone to lift messages left by distraught family and friends and, it's alleged even deleted messages to make room for more.

The editor at the time was Rebecca Brooks, now chief executive of News International, wholly owned by Rupert Murdoch’s News Corporation. She's resisting calls to resign.

Simon Greenberg, News International said "We have written to the family and to their solicitor to say that we want to establish the facts as quickly as possible and make sure that they get to know whatever we find first and we will be co-operating with the police fully to establish anything that we can."

The scandal comes as News Corps owner Rupert Murdoch is engaged in a difficult multi billion dollar takeover of UK satellite TV station BskyB, of which he’s currently 39 per cent owner.

It's also hitting the organisation in the wallet … with a number of major advertisers pulling out.

As members of the UK Parliament voice their horror, police investigations have been widened to include phones linked to the murders of other children and the 2005 terror attack on London which killed 52 people.

These latest developments elevate phone hacking by UK journalists to unprecedented levels.

Individuals could be jailed, but there’s also now a mood in this country for a fundamental change to the ways in which newspapers here are regulated.

Quite possibly new laws that could end a 250 year-old tradition of a free, but until now largely unaccountable Press.