Scotland Yard is carrying out a full forensic review of the Daniel Morgan murder 25 years ago amid allegations that the News of the World under Rebekah Brooks attempted to subvert the inquiry into the killing.

The revelation came as Nick Herbert, the police minister, told MPs a judicial inquiry into the murder was under consideration. The death of Morgan, a private detective who was killed with an axe to the head, has for two decades been mired in allegations of police corruption involving a detective agency using officers to provide information to sell to tabloid newspapers.

Speaking at an adjournment debate brought by the Labour MP Tom Watson, Herbert said it was a serious issue, and that the corruption and the lack of justice for the family needed to be addressed. He said the home secretary was considering a judicial inquiry but another option of an outside force being brought in with the oversight of a QC was also being considered by himself and the home secretary.

"This is a matter of utmost seriousness … It's important to consider what options are now available to identify and address issues of police corruption and bring those responsible to justice," said Herbert.

He revealed that the Morgan murder – one of the Met police's most notorious unsolved killings – was now being overseen by the assistant commissioner Cressida Dick, who would bring "fresh eyes" to a controversy which has run through the stewardship of five Met police commissioners. He said the Met under Bernard Hogan-Howe was carrying out a full forensic review of the case – similar to the one undertaken in the Stephen Lawrence murder which led to the successful conviction of two men earlier this year.

Watson urged the minister and the home secretary to give Morgan's family the judicial inquiry into the murder which they have requested, and which the Metropolitan Police Authority and the former acting commissioner Tim Godwin have endorsed.

Watson said Morgan's family had always believed he was killed as he was about to expose a network of police corruption involving his business partner Jonathan Rees, his friend the Met police detective Sid Fillery and a network of corrupt police officers.

Rees's private detective agency worked for the News of the World and other newspapers. One of Rees's close associates was Alex Marunchak, who was the News of the World's crime correspondent. The men were so close they shared a business address for their companies. Watson also told MPs that Southern Investigations settled Marunchak's debts.

Surveillance footage filmed by the police in operations over the years to investigate the murder showed Marunchak and Rees were in frequent contact at his agency. "Jonathan Rees and Sid Fillery were at the corrupt nexus of private investigators, police officers and journalists at the News of the World," said Watson. "Southern Investigations was the hub of police and media contacts involving the illegal theft and disclosure of information obtained thorugh Rees and Fillery's corrupt contacts."

Rees has always been a suspect for the murder. But the first investigation was corrupted – the Met police has since admitted – by the presence of Fillery on the investigating team. Fillery interviewed Rees, but never disclosed to the investigation that the pair were close friends and business associates, MPs heard.

After Morgan's death Fillery became Rees's partner in Southern Investigations. Watson told MPs Morgan had been about to take his story about police corruption to the News of the World and its crime reporter Marunchak at the time he was killed and had been promised £40,000 for the story.

The Leveson inquiry heard this week that the News of the World under Brooks put the senior officer who led the fourth and fifth investigations into the Morgan murder under surveillance. Detective Chief Superintendent Dave Cook and his then wife Jacqui Hames believed that the suspects in the Morgan murder had encouraged the tabloid to watch them. Hames told the inquiry she believed the News of the World had put them under surveillance because "suspects in the Daniel Morgan murder inquiry were using their association with a powerful and well-resourced newspaper to intimidate us and try to attempt to subvert the investigation".

The fifth inquiry into the murder collapsed last year and Rees and two other men were acquitted after the judge ruled senior police had coached one of the main supergrasses in the case, and it was revealed that large amounts of evidence had not been disclosed as a result of the vast material gathered over so many years.

But Watson said: "What the family didn't know during the investigation was the extent to which the relationship between News International, private investigators and the police had such an impact … Southern Investigations sold information to newspapers in the 90s … but I think exclusively to News International after Rees was released from jail in 2005 [on another offence]. The main conduit was Alex Marunchak.

"Rees and Marunchak had a relationship that was so close they both registered their companies at the same address. Rees's confirmed links to Marunchak take the murder of Daniel Morgan to a new level."

Morgan's brother Alastair, who was at the debate on Wednesday, said afterwards: "The seeds of the hacking scandal that is unravelling at the Leveson inquiry were planted a quarter of a century ago in a car park in south-east London where my brother was murdered." He said he still wanted to know the extent to which journalists interfered with the five murder investigations and the political response to allegations of police involvement in the murder.

• This article was amended on 6 March 2012. The original said that Marunchak and Rees were in frequent contact with Rees at his agency. This has been corrected.