Former News of the World editor Andy Coulson and his former royal editor Clive Goodman have been arrested on suspicion of corruption.

Police search Andy Coulson's house (Reuters)

Police search Andy Coulson's house after his arrest (Reuters)

Coulson, who was also David Cameron's communications director before resigning last January, has been arrested over allegations of involvement in the phone hacking and alleged payments to police during his editorship of the News of the World between 2003 and 2007.

Goodman was also arrested over allegations of corruption, according to police sources.

Investigators from Operation Weeting, the phone hack inquiry, and officers from Operation Elveden, the investigation into illegal payments to police, are now questioning the pair.

The Guardian says Coulson is likely to be released on bail to appear in court at a later date alongside three former colleagues who have already been arrested - Ian Edmondson, Neville Thurlbeck and James Weatherup.

The Prime Minister said Coulson resigned because of things that had happened "on his watch" at the News of the World.

"I gave him a second chance, and it didn't work out, it was my decision to hire him and my decision alone and I take full responsibility for it," he said.

He said they discussed the hacking allegations while he was employed but he never had reason to doubt "the assurances he had given me and I accepted".

Labour leader Ed Miliband urged Mr Cameron to apologise for an "appalling error of judgement" in hiring Coulson.

He said Mr Cameron should put things right by "apologising for bringing him in to the centre of the government machine. Coming clean about what conversations he had with Andy Coulson before and after his appointment about phone-hacking."

James Murdoch, chairman of publisher News International, said the 168-year history of Britain's best-selling newspaper would come to an end when the final edition was published on Sunday.

The closure comes after claims that it paid private investigators to illegally intercept the voicemail messages of murdered schoolgirl Milly Dowler, bereaved military families and relatives of 7/7 bombing victims.

Mr Cameron has ordered two public inquiries into the scandal, one looking at failings in the original police inquiry and the second examining the behaviour, practices and ethics of journalists and media organisations.