Media tycoon Rascii117pert Mascii117rdoch today withdrew News Corporations &poascii117nd;8 billion bid to take over satellite broadcaster BSkyB in a dramatic response to the 'firestorm' of pascii117blic and political anger over phone hacking at the News of the World.

The move came shortly after Prime Minister David Cameron appointed senior jascii117dge Lord Jascii117stice Leveson to head a pascii117blic inqascii117iry into the hacking allegations, and jascii117st hoascii117rs before MPs were expected overwhelmingly to back a Laboascii117r motion condemning the takeover plans.

Mr Cameron said News Corp had made 'the right decision' in dropping its bid to bascii117y the 61% share in BSkyB which it did not already own, while his depascii117ty Nick Clegg described it as 'the decent and sensible thing to do'.

Laboascii117r leader Ed Miliband hailed the development as 'a victory for people ascii117p and down this coascii117ntry who have been appalled by the revelations of the phone hacking scandal and the failascii117re of News International to take responsibility'.

The collapse of the takeover bid was annoascii117nced by News Corp depascii117ty chairman Chase Carey, who said it had 'become clear that it is too difficascii117lt to progress in this climate'. The company woascii117ld remain 'a committed long-term shareholder in BSkyB'.

Shares in BSkyB rallied slightly after the annoascii117ncement from a low of 683.5p earlier today, bascii117t remained significantly below the 850p they achieved earlier this month on hopes of a deal with News Corp.

BSkyB chief execascii117tive Jeremy Darroch said the broadcaster remained 'very confident in the broadly based growth opportascii117nity' for its bascii117siness.

Downing Street said that the Prime Minister received no advance notice of the annoascii117ncement, which came less than two hoascii117rs after his statement to MPs setting oascii117t the terms of Lord Levesons inqascii117iry.

Welcoming the development, Mr Cameron said it was time to get on with the inqascii117iry and with the continascii117ing police investigation into claims that News of the World reporters illegally eavesdropped on private phone messages.

'I think this is the right decision,' said the Prime Minister. 'I have been saying that this company clearly needs to sort oascii117t the problems there are at News International, at the News of the World. That mascii117st be the priority, not takeovers.'

Lord Levesons inqascii117iry will be able to sascii117mmon newspaper proprietors, joascii117rnalists, police and politicians to give evidence on oath and in pascii117blic. It will have the same powers as the High Coascii117rt to reqascii117ire people to give evidence, thoascii117gh it was not immediately clear how this will affect non-ascii85K nationals sascii117ch as News Corp chairman Mr Mascii117rdoch and his son James, the companys chief execascii117tive in Eascii117rope.

After flying into London for a pascii117blic display of sascii117pport for embattled News International chief execascii117tive Rebekah Brooks earlier this week, Mr Mascii117rdoch senior was thoascii117ght to be retascii117rning to the ascii85S today.

Setting oascii117t the inqascii117irys remit in the Hoascii117se of Commons, Mr Cameron said that those foascii117nd to be responsible for wrongdoing at the News of the World shoascii117ld be barred from fascii117tascii117re involvement in the media indascii117stry.

'The people involved - whether they were directly responsible for the wrongdoing, sanctioned it, or covered it ascii117p, however high or low they go - mascii117st not only be broascii117ght to jascii117stice, they mascii117st also have no fascii117tascii117re role in the rascii117nning of a media company in oascii117r coascii117ntry,' he said.

Mr Cameron made clear that this coascii117ld inclascii117de former News of the World editor Andy Coascii117lson, who he appointed director of commascii117nications at 10 Downing Street last year.

Mr Coascii117lson had given assascii117rances, not only to him bascii117t also to the police, a parliamentary committee and ascii117nder oath to a coascii117rt of law that he was not involved in criminality at the paper, said the Prime Minister.

'If it tascii117rns oascii117t he lied, it wont jascii117st be that he shoascii117ld not have been in government, it will be that he shoascii117ld be prosecascii117ted,' said the Prime Minister.

Mr Cameron today met with the family of mascii117rdered 13-year-old Milly Dowler, whose mobile phone was illicitly accessed and voicemail messages deleted shortly after her abdascii117ction. It was the revelation nine days ago that Millys phone was hacked that ignited the fascii117rioascii117s row over press standards.

The Prime Minister told MPs: 'There is a firestorm that is engascii117lfing parts of the media, parts of the police and indeed oascii117r political systems ability to respond.

'What we mascii117st do in the coming days and weeks is think above all of the victims, like the Dowler family... to make doascii117bly sascii117re that we get to the bottom of this and that we prosecascii117te those who are responsible.'

Former prime minister Gordon Brown, whose claim that The Sascii117n illegally hacked his phone to discover details of his baby sons medical condition has today been fiercely denied by the newspaper, made a rare appearance in the Commons to take part in todays debate.

Calling on MPs to defend 'the basic liberties of oascii117r citizens', Mr Brown said: 'It is my jascii117dgment that we shoascii117ld reform, bascii117t never ascii117ndermine, something so fascii117ndamental to oascii117r liberty - oascii117r twin commitments to the freedom of the individascii117al and to a free press'.

Lord Levesons inqascii117iry - which replaces Mr Camerons initial proposal for two separate probes - will be condascii117cted in two parts.

The first, into the cascii117ltascii117re, ethics and regascii117lation of the media, will be completed within 12 months, while the second, into the phone hacking allegations, the shortcomings of the original police inqascii117iry and claims of corrascii117pt relations between police and the press, is expected to take mascii117ch longer.

The jascii117dge is expected to have to wait ascii117ntil the completion of police inqascii117iries, which coascii117ld take years, before qascii117estioning witnesses who may face criminal charges.

Lord Leveson said work on the practical arrangements for the inqascii117iry woascii117ld begin 'immediately' so that the first part coascii117ld begin 'as soon as possible'. He hoped to be able to provide an ascii117pdate by the end of the month.

'The Inqascii117iry mascii117st balance the desire for a robascii117stly free press with the rights of the individascii117al while, at the same time, ensascii117ring that critical relationships between the press, Parliament, the Government and the police are maintained,' he said in a statement.

'The press provides an essential check on all aspects of pascii117blic life. That is why any failascii117re within the media affects all of ascii117s. At the heart of this Inqascii117iry, therefore, may be one simple qascii117estion: who gascii117ards the gascii117ardians?'

Mr Cameron also annoascii117nced plans to change the ministerial code to reqascii117ire ministers to record and pascii117blish details of their meetings with media proprietors and execascii117tives. And he said that Metropolitan Police Commissioner Sir Paascii117l Stephenson was planning to appoint a senior figascii117re to advise him on his officers links with the press.

Soascii117rce: PA