Yesterday morning, Andy Coulson, British Prime Minister David Cameron’s former director of communications and a former editor of Rupert Murdoch’s News of the World, was arrested. He was released on police bail later that day after being questioned over phone hacking and bribes paid to police officers by the tabloid newspaper.

The former royal editor of News of the World, Clive Goodman, was questioned separately and also released on bail.

The newspaper is at the centre of allegations of widespread phone hacking, cash payments to police officers and other illegal practises. The revelations do more than threaten Murdoch’s vast business empire. Coulson’s arrest epitomises the way in which the scandal has engulfed the Conservative-Liberal Democrat government and the entire political establishment, and threatens to discredit all of the major parties and institutions of the state.

Only the day before, News International (NI), the parent company of Murdoch’s British newspapers, had announced that the 168-year-old News of the World, which dominates the Sunday newspaper market, would cease publishing. Some 200 staff are to lose their jobs as a result of the closure. It is understood that there are plans to open a Sunday edition of the Sun, the daily sister tabloid of News of the World.

The decision to close the newspaper was described by some as “bold” and “astonishing.” It was, in fact, the least Murdoch could do to try and stem the tide of revelations that become more damaging daily.

For years, News International, a UK subsidiary of Murdoch’s News Corporation, has insisted that allegations of phone hacking concerned only a few celebrities and involved only “rogue reporters.” In 2007, private investigator Glenn Mulcaire and royal correspondent Clive Goodman were jailed for hacking the mobile phones of members of the royal family. Since then, several million pounds have been paid out by News International in compensation to various celebrities in return for their silence.

In recent days, however, the rogue reporter defence became impossible to maintain as it became clear that thousands of people were subjected to such practises. These included child murder victims and their relatives, together with the families of the victims of the 2007 London terror bombings and of soldiers killed serving in Iraq and Afghanistan.

The criminality did not stop there. The Independent Police Complaints Commission (IPCC) is now investigating cash payments to serving police officers in return for confidential information. Brian Paddick, the former metropolitan police deputy assistant commissioner, told the BBC this week of officers collecting up to £30,000 at a time in envelopes at the McDonalds restaurant near the News International headquarters. It is alleged that Coulson, who was the editor of News of the World between 2003 and 2007, authorised the payments.

NI executives are also accused of lying to Parliament. Coulson and Rebekah Brooks, the current chief executive of News International and editor of News of the World from 2000 to 2003, both gave evidence to parliamentary select committees that only one journalist was involved in phone hacking.

In an emergency debate in parliament on Wednesday, Labour Party MP Tom Watson alleged that NI was involved in attempts to destroy incriminatory e-mail evidence. Watson used his parliamentary privilege to state, “We now know that NI had entered the criminal underworld.”

On Friday afternoon it was confirmed that police are investigating the alleged deletion by a News International executive of millions of emails from an internal archive in India. Separately police in Glasgow are reported to be investigating the evidence given by Coulson and NI in the 2010 perjury trial of former Scottish Socialist Party leader Tommy Sheridan. By closing News of the World, NI clearly hopes to bury the evidence and protect Brooks and Murdoch himself.

Watson has said in parliament that James Murdoch, the son of Rupert Murdoch and chair of NI, should face criminal charges. He declared: “It is clear now that he personally, without board approval, authorised money to be paid by his company to silence people who had been hacked and to cover up criminal behaviour within his organisation. This is nothing short of an attempt to pervert the course of justice.”

Among those who received payments was Gordon Taylor, chief executive of the Professional Footballers’ Association. James Murdoch approved a £700,000 ($1.1 million) out of court settlement.

Another major factor for Murdoch is to protect his planned £8 billion takeover of BSkyB, a satellite broadcasting company. Jeremy Hunt, the culture secretary, was due imminently to approve the deal, despite opposition. It is now understood that Hunt will delay his decision. BSkyB shares fell heavily on the news.

Cameron is equally desperate to put an end to the affair. On Friday, he was forced to announce two separate inquiries into the scandal surrounding News of the World. At a press conference, his statement indicated the extent of the crisis posed before the political establishment. “The truth is, we have all been in this together—the press, politicians and leaders of all parties—and yes, that includes me,” he said.

The escalating scandal surrounding the Murdoch media empire in Britain is a devastating indictment of the political system and exposure of the putrefaction of democracy in the UK. All of the major parties have prostrated themselves before the arch-reactionary Murdoch, who made his name and built his empire by smashing unions and destroying the wages and conditions of workers.

Murdoch backed Tony Blair and the Labour Party during most of Labour’s 13-year reign beginning in 1997, and then switched to the Conservatives and Cameron, backing his election in 2010. With Murdoch’s support, Cameron has launched a historic assault on what remains of the welfare states in Britain.

The entire political establishment, police and others, have been shown to be entirely beholden to a handful of financial oligarchs with Murdoch standing in the front rank.

Cameron’s inquires pledge is intended to bury this essential fact. He said there would be one inquiry led by a judge into what happened at the newspaper and the failure of police to act earlier. But, he insisted, “the bulk of this inquiry can only happen when the police investigation has finished.” This means that it could be delayed for months, if not years.

Labour leader Ed Miliband had previously led calls for an inquiry headed by a judge. Miliband clearly hopes that he can put some distance between the Labour Party and the Murdoch press. Any genuine inquiry would be just as damaging for Labour as for the Conservative-Liberal Democrat coalition.

The issue that should properly be investigated is not merely the actions of the Murdoch media empire, but those of the political elite and the police in covering for such criminality year after year. Cameron said in his statement that his government is consulting “now with select committees and others on the terms of reference, remit and powers” of an inquiry. Miliband is to meet with Cameron next week to discuss inquiry arrangements.

The purpose of all such talks will be to ensure that everything possible is done to minimise the political fallout from the latest revelations.

Geoffrey Robertson QC, who heads the Media Legal Defence Initiative, has already rejected Cameron’s assertion that an inquiry must wait until the police investigation is complete. He insisted that this is not a legal requirement. “If we want to get to the bottom of what is a really groundbreaking public scandal, we need to set up an inquiry that starts immediately,” he said.

The second inquiry is to involve a panel of experts to look at the “culture, ethics and practices of the British press.” Through such means, the government hopes to deflect from the specific allegations against NI and kick the scandal into the long grass. With examples ranging from the Bloody Sunday massacre in Northern Ireland, to the death of Iraq War whistleblower Dr. David Kelly and the lies used to justify the war, the British ruling elite are past masters at using inquiries that drag on for years to whitewash crimes and prevent those responsible from being held accountable.