The row also piled pressure on the Tories’ PR chief, Andy Coulson, who was the editor of the Sunday tabloid at the time of the alleged practices.
Conservative leader David Cameron moved to defend his director of communications as Labour MPs lined up to demand his sacking, comparing him to ousted Labour spin doctor Damian McBride.
The cross-party Culture, Media and Sport Select Committee announced this morning that it was reopening an inquiry it held after the News of the World’s royal editor, Clive Goodman, was jailed for using illegal surveillance techniques.
The committee’s chairman, Tory MP John Whittingdale, said it would be asking former News International chief Les Hinton whether he wished to amend his previous assertion that no other journalists knew of Mr Goodman’s activities.
He said the committee may also call Mr Coulson to give evidence, among several present and former News International executives.
Those allegedly targeted by the News of the World included former deputy prime minister John Prescott, Mayor of London Boris Johnson and celebrities including actress Gwyneth Paltrow and celebrity chef Nigella Lawson.
Mr Prescott, who has led calls for Mr Coulson to be fired, has also criticised the Met for failing to inform him that journalists were trying to access his phone messages.
Met Commissioner Sir Paul Stephenson said he had asked Assistant Commissioner John Yates to “establish the facts of this case and look into the detail”.
“If we need to investigate, we will investigate,” he said. “We will do the right thing and do what we have to do to investigate crime wherever it exists.”
Home Office Minister David Hanson, who faced a barrage of questions from angry MPs today, told the Commons: “These are serious allegations that have been made. They deserve an examination.”
Mr Whittingdale, whose committee held an emergency meeting this morning to re-launch its inquiry, said there would be a hearing next Tuesday, when it hoped to question Mr Hinton and the Guardian, which published today’s claims.
He pointed out that Mr Hinton had previously assured the committee that “no other employee at News International had any knowledge”.
“We will wish to ask him if he wants to add to that or amend the evidence he has given,” he said.
The committee would decide later who else it wanted to question, he said, adding: “I expect it to be several of the senior executives at News International and indeed ex-employees, including Andy Coulson, and indeed possibly employees of other newspaper groups if there were information that would suggest we should see them also.”
The furore broke after the Guardian reported that News Group Newspapers, which publishes the News of the World, had paid out more than £1 million to settle cases that threatened to reveal evidence of its journalists’ alleged involvement in telephone hacking.
It quoted sources saying police officers found evidence of News Group staff using private investigators who hacked into “thousands” of mobile phones.
Labour and Liberal Democrat MPs condemned the Conservatives’ continued employment of Mr Coulson, drawing a direct parallel with Mr McBride, Gordon Brown’s former director of strategy and communications.
He was forced to quit earlier this year after it emerged that he penned emails suggesting spreading unfounded email slurs about senior Conservatives.
Mr Coulson resigned from the News of the World in 2007 after Goodman was sentenced to four months in prison for plotting to hack into telephone messages belonging to royal aides.
Several months later he was appointed by Mr Cameron. The Tory leader indicated today that he had no intention of sacking him.
“It’s wrong for newspapers to breach people’s privacy with no justification,” Mr Cameron said.
“That is why Andy Coulson resigned as editor of the News of the World two and a half years ago.
“Of course I knew about that resignation before offering him the job. But I believe in giving people a second chance.
“As director of communications for the Conservatives, he does an excellent job in a proper, upright way at all times.”
A Downing Street spokesman said today that the Prime Minister believed that “people in public life should act with honesty and integrity, as he has made clear on previous occasions”.
Yesterday The Guardian reported that News Group Newspapers paid out more than £1 million in legal cases brought against its journalists over allegations that information was obtained illegally.
Professional Footballers’ Association chief executive Gordon Taylor was paid £700,000, the newspaper said.
Today, the data protection watchdog said that evidence against 31 journalists from the News of the World and The Sun was passed to the Metropolitan Police three years ago.
The Information Commissioner said the evidence concerned allegations of buying and selling personal information obtained illegally.
The evidence was then passed to Mr Taylor’s lawyers last year, following a court order.
Assistant Information Commissioner Mick Gorrill said: “The Information Commissioner’s Office (ICO) exposed the widespread media involvement in illegally obtaining personal information in its reports, What Price Privacy? and What Price Privacy Now?
“The ICO named some of the UK’s newspapers and magazines which bought people’s personal information in search of a story.
“Following a court order in 2008, we made available a copy of some information from our investigation into the buying and selling of personal information, to lawyers acting on behalf of Gordon Taylor.
“This included material that showed that 31 journalists working for The News of the World and The Sun had acquired people’s personal information through blagging.”
Mr Prescott said he was “staggered” that a spokeswoman for Mr Cameron had said he was “relaxed” about the story.
He also said he wanted answers from the police over claims that they knew his phone was tapped by private investigators working for journalists.
“For such a criminal act not to be reported to me, and for action not to be taken against the people who have done it, reflects very badly on the police, and I want to know their answer.”
Liberal Democrat home affairs spokesman Chris Huhne said: “At the very least, Andy Coulson was responsible for a newspaper that was out of control and at worst he was personally implicated.
“Either way, a future prime minister cannot have someone who is involved in these sort of underhand tactics. The exact parallel is with Damian McBride.”
PR agent Max Clifford, whose phone was also allegedly hacked into, said the claims raised “lots of serious questions”.
Mr Clifford, who works with some of Britain’s best known celebrities, said: “If these allegations prove to be true, then it’s something that an awful lot of people are going to very unhappy about.”
Mr Coulson said last night: “This story relates to an alleged payment made after I left the News of the World two-and-a-half years ago.
“I have no knowledge whatsoever of any settlement with Gordon Taylor.
“The Mulcaire case was investigated thoroughly by the police and by the Press Complaints Commission. I took full responsibility at the time for what happened on my watch but without my knowledge and resigned.”
Business Secretary Lord Mandelson said the claims in the Guardian should be properly investigated.
“People need to give a proper explanation of what went on, how it was financed, who was involved, and who authorised it,” he told the BBC.
“That is what the public wants to know and I believe that the police and other authorities have a job to do.”