* YOU BEEN SNAP * HACKING LIVE: 'At least I've never seen Rebekah in her pyjamas'. Cameron's dig at Brown as he defends relationship with ex-NotW Editor ""Miss FB say: kwa hiyo ulimuona bila anything.!!..mbuta nanga!!

• Cameron: With benefit of hindsight I would not have employed Andy Coulson
• If it turns out he has lied over hacking then I will make profoundest apology
• My chief of staff did nothing wrong over advice he gave to the Met police
• The Conservative party has never employed Neil Wallis or his company
• News International: We have stopped paying the legal fees of Glenn Mulcaire

*MKILETEWA HAPA NA FLORA LYIMO DESIGNER *

David Cameron today came out fighting as he defended his relationship with Rebekah Brooks in an extraordinary exchange in the House of Commons.

During an emergency debate on the phone hacking scandal which has engulfed Westminster, the prime minister was asked whether his friendship with New International's former chief executive was appropriate.

Labour MP David Lammy demanded to know the truth of an article written by Jeremy Clarkson - one of the so-called Chipping Norton set which also includes Mrs Brooks and Mr Cameron.

The Top Gear presenter had claimed that the main subject between the former News of the World editor and the prime minister had been sausage rolls for a Christmas walk.
‘I can assure the House that I’ve never held a slumber party or seen her in her pyjamas,’ Mr Cameron said in a thinly veiled attacked on his Labour predecessor Gordon Brown.

The jibe refers to an event Mr Brown's wife Sarah held in 2008 at Chequers, attended by Mrs Brooks, Mr Murdoch's wife Wendi and his daughter Elisabeth. Guests were told to 'bring their pyjamas' for the sort of sleepover usually favoured by teenage girls.

Statement: David Cameron addresses the House of Commons about phone hacking today'

Earlier, the PM said that he had done nothing wrong during the mothballed bid for BSkyB, had not had any dealings with hacking suspect Neil Wallis - and had behaved properly in employing Andy Coulson.


But he added that he was 'extremely sorry' about the furore caused by his decision to appoint Mr Coulson, the former editor of the News of the World who has been arrested as part of the phone hacking inquiry.

And he admitted that if he had the benefit of hindsight he would not have hired Mr Coulson.

Close: Rebekah Brooks (right) attended a slumber party hosted by Sarah Brown at Chequers;

'It was my decision, I take responsibility,' he told the Commons. 'With 20-20 hindsight and all that has followed, I would not have offered him (Mr Coulson) the job and I expect that he wouldn't have taken it.

'But you don't make decisions in hindsight, you make them in the present.

'You live and you learn and, believe you me, I have learnt.'

He continued: 'If it turns out Andy Coulson lied then he will not only have lied to me but to the police, to the select committee and the press complaints commission and perjured himself in a court of law.

'I have an old-fashioned view about innocent until proven guilty.'

Mr Cameron said that if Mr Coulson had lied about phone hacking at his time at the News of the World then he should face 'severe' criminal charges.

He added: 'If it turns out I have been lied to that would be a moment for a profound apology, and in that event I can tell you I will not fall short.'

Labour leader Ed Miliband accused Mr Cameron of being caught in 'a tragic conflict of loyalty' and 'hamstrung' by his decision to stand by Mr Coulson.

'This catastrophic error of judgment - hiring Andy Coulson, hanging on to him too long - directly contributed to the position Sir Paul found himself in and his decision to resign,' said Mr Miliband.

'The Prime Minister was compromised by his relationship with Mr Coulson and therefore could not be told anything at all about an investigation concerning a member of his own staff.'

The Labour leader accused Mr Cameron of 'consistently ignoring warnings' about his director of communications and said people would have expected 'very loud alarm bells' to ring in Mr Cameron's mind following allegations in the New York Times.

'This can't be put down to gross incompetence. It was a deliberate attempt to hide from the facts,' said Mr Miliband. 'He says in hindsight he made a mistake by hiring Mr Coulson. He says if Mr Coulson lied to him, he would apologise.

'That isn't good enough. It's not about hindsight, it's not about whether Mr Coulson lied to him. It's about all the information and warnings the Prime Minister ignored.

'He was warned and he preferred to ignore the warnings.'

Packed house: MPs had delayed their summer recess to debate the phone hacking scandal'

DID BUCKINGHAM PALACE WARN CAMERON ABOUT COULSON?

Buckingham Palace was 'troubled' by David Cameron's decision to hire Andy Coulson, it was claimed today.

Labour MP Chris Bryant made the extraordinary revelation to the BBC. He said: 'Very senior people at Buckingham Palace were very troubled by the appointment of Andy Coulson and tried to make it absolutely clear to the Prime Minister.

'I am not sure whether this information ever got directly to the Prime Minister, but it certainly got to senior figures at Downing Street.

'The Queen's grandchildren had their phones hacked. And quite probably other members of the Royal Household ... I think it would be perfectly natural for very senior members of the Royal Family to be very troubled about the appointment.
'After all, Andy Coulson was the editor of the News of the World when the royal princes' phones were hacked. That is not in dispute. And Andy Coulson indeed resigned from the News of the World expressly because of the hacking of the royal princes' phones.'

However Mr Bryant's claim was strongly rejected by Buckingham Palace. A spokesman said: 'On no occasion did any officials from Buckingham Palace raise concerns to Downing Street and indeed it is outrageous to suggest this.'

A No. 10 source described Mr Bryant's claims as 'scurrilous' and 'complete rubbish'.

The source insisted that at no point did the Palace try to warn officials at Downing Street or Mr Cameron's political team against Mr Coulson's appointment.

Mr Miliband added: 'So the country can have the leadership we need, why doesn't he do more than give a half-apology and provide the full apology now for hiring Mr Coulson and bringing him into the heart of Downing Street?'

Mr Cameron bit back by saying Gordon Brown had been the first person to wish Andy Coulson well after he resigned from the News of the World.

The current Prime Minister made the claim after Labour's Jack Dromey (Birmingham Erdington) told the Commons that Mr Coulson, by hiring those who hacked the phone of Milly Dowler, was either 'guilty of being complicit of corrupt culture or that he presided over acts of pure evil'.

Mr Cameron also insisted his chief-of-staff had behaved 'entirely properly' in declining a briefing on the police investigation into hacking.

'To risk any inference that Number 10 was seeking to influence a police investigation in any way would have been entirely wrong,' he said.

The prime minister was repeatedly forced to return to his actions during the BSkyB bid which the Murdochs withdrew in the wake of the hacking scandal.

He told MPs he had deliberately kept away from any discussions about the deal, which would have given the Murdochs full control of Sky, in order for the process to be fair.

But when pressed on if he had ever had any conservations with News International executives about the bid, he did not offer a denial.

He instead said no discussions had been 'inappropriate.'

Mr Cameron had asked for the summer recess to be delayed so that he give a statement to the House on hacking and a debate on the affair could be held this afternoon.

He opened the session by saying the British public wanted the Government to deal with the hacking scandal, then move on to tackling the other issues facing the nation.

'Over the past two weeks, a torrent of revelations and allegations has engulfed some of this country's most important institutions,' he said

'It has shaken people's trust in the media and the legality of what they do, in the police and their ability to investigate media malpractice, and, yes, in politics and in politicians' ability to get to grips with these issues.

'People desperately want us to put a stop to the illegal practices, to ensure the independence and effectiveness of the police and to establish a more healthy relationship between politicians and media owners.

On the attack: Ed Miliband said that Mr Cameron needed to offer a full and more profound apology;

THE LEVESON INQUIRY

David Cameron today named the panel of independent experts who will help Lord Justice Leveson (pictured, ) examine media practices in the wake of the phone hacking scandal.
They include Shami Chakrabarti, the director of human rights group Liberty (below), who said: 'It was a daunting privilege to be invited to join Lord Justice Leveson's panel for such an important public inquiry under the Inquiries Act 2005.

'My acceptance is a vote of confidence in the vital role of independent judicial process in times of national difficulty.
'It comes from an optimism in the ability of a great democracy to look itself in the mirror in the spirit of re-building public trust.

'It reflects Liberty's belief in an appropriate balance between personal privacy and media freedom and above all in the Rule of Law.'
Other panel members are former Daily Telegraph and Press Association journalist George Jones (above); former political editor for Channel 4 News Elinor Goodman (below, left); former chairman of the Financial Times Sir David Bell; Lord David Currie, former chairman of Ofcom; and former chief constable of West Midlands police Sir Paul Scott-Lee.

The inquiry will look at the phone hacking scandal specifically but also at broader issues involving politics, the media and the police.
It is expected to report within 12 months.
When he was appointed, Lord Justice Leveson said: 'The press provides an essential check on all aspects of public life.

'That is why any failure within the media affects all of us.
'At the heart of this inquiry, therefore, may be one simple question: who guards the guardians?'

'Above all, they want us to act on behalf of the victims: people who have suffered dreadfully - including through murder and terrorism - and who have had to re-live that agony all over again because of phone hacking.'

Mr Cameron updated MPs on Lord Justice Leveson's inquiry into phone hacking and revealed who will sit on the panel. These include civil liberties campaigner and director of Liberty, Shami Chakrabarti, the former chief constable of the West Midlands Sir Paul Scott-Lee and a number of respected journalists

The inquiry's remit, which has been expanded following a consultation process which included talks with the Hacked Off campaign and the parents of murdered schoolgirl Milly Dowler, was also set out by Mr Cameron.

'There should be no doubt that this inquiry should be as robust as possible,' he said.

The Prime Minister tried to suggest that he was above party politics by emphasising the steps being taken to reform relationships between politicians, police and the media.

He told MPs: 'The public want us to sort this out, and they want us to do this in a cross-party way. Thus is because they want us to get on to the other really important issues.'

He underscored this attempt to be seen as non-partisan by telling Labour leader Ed Miliband: 'Stop spouting feeble conspiracy theories.'

This was after Mr Miliband said: ‘The prime minister was caught in a conflict of loyalty … He made the wrong choice. He chose to stick with Mr Coulson.’

The Labour leader also accused Mr Cameron’s aides of building ‘a wall of silence around the prime minister’.

But tribalism became more apparent the longer their exchange continued.

Mr Cameron pointed out that Mr Miliband is the only party leader with a ‘former News International executive with a cloud over his head sitting in his office’.

That was a reference Tom Baldwin, Labour's director of communications, who was a journalist for The Times.

The premier also noted that Rupert Murdoch said yesterday the politician he was closest to was Gordon Brown as chancellor.

‘And who was the adviser to Brown when he was chancellor? It was Ed Miliband’, Mr Cameron added.

The prime minister indicated that there needed to be a massive overhaul of the way that all politicians interacted with the media.

Liberal Democrat deputy leader Simon Hughes asked him if he accepted that governments for more than 20 years 'have been far too close to the media giants" and that had to end, along with backdoor visits to No 10.

Mr Cameron replied that his meeting referred to with Murdoch had been declared in the proper way, adding: 'In the old days, the only way you found out whether someone had met Rupert Murdoch was waiting for Alastair Campbell's diaries.'

He also said that the current system of media self-regulation had totally failed.

'We've got to try and find a way to make sure the Press is regulated in a way that is independent from them but not by the state and the Government.'

CAMERON ON FALLOUT AT THE MET

Under pressure: David Cameron leaves Downing Street on his way to address the Commons about phone hacking'

Following the turmoil at the Metropolitan Police caused by the resignations of Commissioner Sir Paul Stephenson and Mr Yates, the Prime Minister said an independent figure from outside the force will now take over the phone-hacking investigation.

He said: 'The current deputy commissioner - Tim Godwin - who stood in for Paul Stephenson when he was ill, and did a good job, will shortly do so again.

'The vital counter-terrorism job, carried out by John Yates, will be taken on by the highly experienced Cressida Dick.

'The responsibilities of the deputy commissioner - which the House will remember include general oversight of the vital investigations both into hacking and into the police, Operations Weeting and Elveden - will not be done by someone from inside the Met, but instead by Bernard Hogan-Howe, who will join temporarily from Her Majesty's Inspectorate of Constabulary.'

He said 'this whole affair raises huge issues about the ethics and practices of our police' and called for a fundamental shake-up of police recruitment and careers to open up access.

'The greatest responsibility I have is to clear up this mess,' he said.

He added: 'There are accusations of criminal behaviour - by parts of the press and potentially the police, where the most rapid and decisive action is required.

'There are the issues of excessive closeness to media groups and media owners where both Labour and Conservative have to make a fresh start.

'There is the history of missed warnings - select committee reports, information commissioner reports - missed by the last government but, yes, also missed by the official opposition too.

'What the public expects is not petty political point-scoring, but what they want, what they deserve, is concerted action to rise to the level of events and pledge to work together to sort this issue once and for all.'

ON HACKING SUSPECT NEIL WALLIS

He also stressed that hacking suspect Neil Wallis, the former deputy editor of the News of the World, had not been paid for any work for the Conservative Party.

But he confirmed that Mr Wallis may have given informal advice to Mr Coulson.

'The Conservative Party chairman has ensured that all the accounts have been gone through and has confirmed to me that neither Neil Wallis nor his company has ever been employed by or contracted by the Conservative Party - nor has the Conservative Party made payments to either of them.

'It has been drawn to our attention that he may have provided Andy Coulson with some informal advice on a voluntary basis before the election.

'To the best of my knowledge, I didn't know anything about this until Sunday night.

'But as with revealing this information, we will be entirely transparent about this issue.'

Former home secretary Alan Johnson asked if Mr Cameron knew that Mr Wallis was giving advice to the Metropolitan Police.

Mr Cameron replied: 'No, I didn't know that and as I've said in relation to the work he did for Andy Coulson, I was unaware of that.'

He added that one of the issues was the transparency of information about Neil Wallis and the Metropolitan Police..

WHAT HIS CHIEF-OF-STAFF TOLD THE MET

During a Home Affairs Select Committee hearing yesterday, former Scotland Yard assistant commissioner John Yates revealed his offer to brief Mr Cameron's chief of staff Ed Llewellyn on the phone hacking inquiry had been declined.

Mr Cameron said it was the right decision, and there would have been 'outrage' if No 10 was seen to be interfering in the investigation.

The Prime Minister said: 'No 10 has now published the full email exchange between my chief of staff and John Yates and it shows my staff behaved entirely properly.

'Ed Llewellyn's reply to the police made clear that it would be not be appropriate to give me or my staff any privileged briefing.

'The reply that he sent was cleared in advance by my permanent secretary, Jeremy Heywood.

'Just imagine if they had done the opposite and asked for, or acquiesced in receiving, privileged information - even if there was no intention to use it.

'There would have been quite justified outrage. To risk any perception that No 10 was seeking to influence a sensitive police investigation in any way would have been completely wrong.'

Morning after the night before: Rupert Murdoch left his house today reading the front page of his paper The Times which covers his appearance at the Commons select committee'

BSKYB AND THE MINISTERIAL CODE OF CONDUCT

The prime minister repeteadly denied that he had acted inappropriately during the BSkyB bid.

He stressed that he removed himself from discussions about the takeover to avoid perceptions of a conflict of interest.

He told MPs: 'I had no responsibility for the BSkyB takeover. I specifically asked to be taken out of any of the decision-making and any of the information because I didn't want to put myself in any sort of compromising position.

'I was very clear about that, so much so that I didn't even know when many of the key announcements were being made.'

Referring to Ms Brooks's appearance before the Culture, Media and Sport Committee yesterday, the Prime Minister added: 'I know many people were hoping for some great allegation yesterday that could add to their fevered conspiracy theories. I'm just disappointed for them they didn't get one.'

Labour former culture secretary Ben Bradshaw asked the Prime Minister whether he had ever discussed Mr Murdoch's BSkyB bid with News International executives, including Rebekah Brooks.

Mr Cameron said: 'As Rebekah Brooks said yesterday in Parliament, there was never a conversation that could have been held... Perhaps you will now be transparent about all the contacts you have had with News International over many years.'

Labour veteran Dennis Skinner (Bolsover) later repeated Mr Bradshaw's question.

To uproar from the Opposition benches, the Prime Minister replied: 'I never had one inappropriate conversation.'

He also dismissed claims that he had broken the ministerial code of conduct by meeting News International executives - including Rebekah Brooks - while Rupert Murdoch was bidding to take over BSkyB.

'The Cabinet Secretary has ruled very clearly that the code was not broken - not least because I had asked to be entirely excluded from the decision,' he said.

The Prime Minister sighed deeply into the despatch box microphone when he faced further questioning over his role in the BSkyB takeover.

Labour's Graham Jones (Hyndburn) asked Mr Cameron: 'Have you ever uttered the word 'BSkyB' in the presence of Rebekah Brooks, Rupert Murdoch or James Murdoch?'

The Prime Minister replied: 'I have, you know...' and then exhaled a long, frustrated, theatrical sigh.