Rupert Murdoch's darkest day as he drops BSkyB bid

After nine days of revelations about the actions of its journalists, News Corporation finally bowed to unprecedented political and public pressure yesterday and withdrew its bid to gain 100 per cent ownership of Britain's biggest broadcaster in terms of revenue.

The 80-year-old tycoon's humiliating climbdown came shortly before MPs from all parties were due to vote to call on him to make such a move.

In the Commons, former prime minister Gordon Brown made fresh allegations of illegality on an "industrial scale" at News International.

He pointed the finger at Rebekah Brooks, the company's chief executive who has been under pressure to quit because of her previous role as editor of the News of the World when the phone of murdered teenager Milly Dowler was hacked into by the paper.

He condemned David Cameron for not taking part in the Commons debate and claimed he was "implicated" in the scandal because he employed former News of the World editor Andy Coulson as his director of communications.

Earlier, Mr Cameron had announced the immediate setting-up of a wide-ranging inquiry into media ethics and the police. The move by Ofcom to apply the "fit and proper persons" test, combined with allegations of widespread malpractice and cover-ups, have put in doubt News Corp's current 39 per cent holding in BSkyB.

Mr Murdoch pulled the plug on the News of the World last week, and the prospect of losing his stake in BSkyB will fuel speculation that he may sell other newspapers in his empire.

The tycoon may have hoped that dropping the BSkyB bid might take some heat out of the scandal.

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But that appeared lost as culture and media select committee chairman John Whittingdale warned that if he did not receive a reply from the mogul, his son James, who heads News Corp Europe and Asia, and Ms Brooks to face his committee next Tuesday, MSPs "may well wish to return to this House to ask it to use the powers available to ensure that witnesses attend".

Opening the debate on BSkyB yesterday, Labour leader Ed Miliband welcomed the decision by News Corp and tried to strike a note of consensus for a motion in his name that was backed by all parties.He said: "This is a victory for people - the good, decent people of Britain, outraged by the betrayal of trust by parts of our newspaper industry, who have spoken out up and down this country, who have contacted members right across this House and told us of their concerns.

"The will of parliament was clear, the will of the public was clear, and now Britain's most powerful media owner has had to bend to that will."

Tory Leader of the House Sir George Young was barracked by Labour MPs asking why the Prime Minister was not present.

Sir George claimed it was right he should lead for the government because it was a "victory for the House", and he went on to praise Labour MPs Tom Watson and Chris Bryant for their efforts in bringing the scandal to prominence.

But the consensus evaporated when Mr Brown rose to speak in the Commons for only the second time since he lost office.

In a powerful and at times emotional speech lasting more than half a hour, he delivered a defence of his government's record in opposing Mr Murdoch's ambitions.

For much of his speech, he refused to allow furious Tory back-benchers, some red in the face with rage, to intervene as he went on to claim that Conservative policies on the media had almost "word for word" become the same in Opposition as those of News Corp.

But the House went silent as he laid out details of further allegations and claimed News International was guilty of "law-breaking on an industrial scale", as well as being involved with British organised crime.

Mr Brown said he knew the names of further victims, telling MPs he was not speaking for himself but for the families of terrorist victims and soldiers killed in war, as well as the family of Milly Dowler.

He told MPs he wanted to defend the freedoms of the press but reforms were needed.

To cries of "sit down" from the Tory benches, he went on to describe a "criminal media nexus."

He said he had evidence Ms Brooks had been informed of the activities in 2002, while he also had a stream of e-mails implicating Alex Marunchak, who became a regional editor of the News of the World and has been arrested over allegations connected with the scandal.

Mr Brown also claimed he had looked at setting up a judge-led inquiry in February 2010 but had been advised against it because it was close to the general election.Labour former culture secretary Ben Bradshaw also accused the government of being too close to the Murdochs, pointing to "policies that could have been written in Wapping".

He said one example was the decision to scrap Labour's proposals for regional news consortia to be funded by a protected element of the licence fee. "James Murdoch hated this idea - I know because he told me so in one of the many rows we had," he said.

"One of the first decisions the Secretary of State (Jeremy Hunt] took when he got into office was to scrap these regional news consortia - despite the fact they were already well down the road to implementation and they had the full support of the industry and the public."

Mr Bryant questioned whether News Corp was a "fit and proper" body to hold any shares in BSkyB.

News Corp deputy chairman and president Chase Carey explained the reasons for dropping the bid for BSkyB.

He said: "We believed that the proposed acquisition of BSkyB by News Corporation would benefit both companies, but it has become clear that it is too difficult to progress in this climate. News Corporation remains a committed long-term shareholder in BSkyB. We are proud of the success it has achieved and our contribution to it."