The Culture Secretary Jeremy Hunt refers the takeover bid for BSkyB to the Competition Commission after News Corp withdraws plans to hive off Sky News.

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Mr Hunt told MPs that the Competition Commission would be able to consider "all relevant recent developments" in evaluating the proposed merger. This means that the Commission's inquiry will be able to take into account the police investigation of phone hacking and corruption allegations, as well as the effect on plurality of ownership.

Earlier, the Minister had written to the media regulator, Ofcom, asking whether the phone hacking revelations that led to the closure of News of the World would alter its recommendations on whether the BSkyB deal should go through.

But, as the Labour leader Ed Miliband called for News Corporation's bid to be referred to the Competition Commission and Deputy Prime Minister Nick Clegg urged Rupert Murdoch to "do the decent thing" and reconsider the bid, Mr Hunt announced he would make a new Commons statement.

And - just minutes before that statement was due to be delivered - News Corporation announced that it was withdrawing its undertakings to hive off Sky News and - instead - was prepared to "engage with" with Competition Commission on the grounds that its takeover of BSkyB would not affect plurality of media ownership.

News Corp chief Rupert Murdoch leaves his London home on July 11, 2011. (Getty)

In another day of rapidly-unfolding events, the family of murdered schoolgirl Milly Dowler met Mr Clegg, later calling on the News International chief executive Rebekah Brooks to quit her post.

Brown 'targeted' by News International

And the stakes were raised still further when the former Prime Minister, Gordon Brown, revealed that police had told him the investigators working for News International had - while he was in office - obtained details of his bank account and of his young son's medical information.

Ed Miliband used a news conference on Monday to repeat a warning that he was prepared to force a Commons vote on whether the bid should go ahead. He said Mr Hunt had ignored the original advice from Ofcom which was that the takeover bid for BSkyB should be referred to the Competition Commission.

"The Government, having repeatedly said there was no alternative to their flawed process, now appears to be moving towards my position," he said.

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"They are doing it not because they want to, but because they have been forced to. Let me be clear: this chaos and confusion in government is all of their own making. They should never have embarked on this sort of process."

Rupert Murdoch flew into Britain on Sunday to take charge of the crisis engulfing his media empire, which led to the closure of the News of the World on Sunday, bringing an end to its 168-year history.

Clegg speaks out

And the Deputy Prime Minister Nick Clegg called on Mr Murdoch to "do the decent and sensible thing, and reconsider, think again, about your bid for BSkyB."

Mr Clegg said: "Rupert Murdoch is now in town in London seeking to sort things out. I would simply say to him: 'Look how people feel about this, look how the country has reacted with revulsion to the revelations.'"

He was speaking after meeting the parents and sister of Milly Dowler, whose phone was allegedly hacked by the News of the World after she went missing in 2002.

The Dowlers' lawyer, Mark Lewis, issued a statement in which the family called for the resignation of beleaguered Mrs Brooks, who is reportedly being questioned as a witness by police into allegations of police bribery.

Read more: News of the World bows out