TheNews of the World phone hacking scandal was part of a “thriving cottage industry” of “grubby” and illegal newsgathering tactics, an inquiry into British media standards was told.

The inquiry, led by Lord Justice Brian Henry Leveson, is also looking into the often cosy relationship of journalists, the political establishment and the police.

In a dramatic statement, underlining the scale of phone hacking, the counsel for the inquiry Robert Jay, QC, said: “I suggest that it would not be unfair to comment that it was, at the very least, a thriving cottage-industry. Apart from being illegal, and this is my language now, it was grubby, underhand, high-handed.”

It also appeared that using private detectives to hack phones for stories was not confined only to one newspaper, he said. Notes seized from a detective who carried out hacking for NoW suggested that he may have also worked forThe Sunand the Daily Mirror.

The NoW, Rupert Murdoch's best-selling British newspaper, was shut down in the summer following revelations that its journalists hacked the phone of a murdered teenaged schoolgirl, Milly Dowler, after she went missing. There is speculation over the future of The Sun after James Murdoch, head of the company that owns it, did not rule out closing it when he appeared before a parliamentary committee last week.

Meanwhile, the inquiry began with a warning to newspapers not to target witnesses who spoke out against them. He said the inquiry would be “monitoring” how the media treated the witnesses.

The warning followed revelations that some of the hacking victims and their lawyers had been tailed by a detective hired by NoW.

He reminded journalists that right to free speech entailed the duty to make sure that it was exercised responsibly. At the heart of the inquiry, he pointed out in his opening statement, was “one simple question: who guards the guardians?”

A number of high-profile politicians, celebrities such as film actor Hugh Grant, media personalities and police figures are expected to give evidence, joining a long cast of victims of NoW hacking, including Milly Dowler's parents.

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