Police search homes of paper's chief reporter and former news editor as CPS and police row over failure of first inquiry

Scotland Yard's inquiry into allegations of phone hacking by the News of the World took a dramatic turn on Tuesday as the paper's chief reporter, Neville Thurlbeck, and its former assistant editor Ian Edmondson were arrested on suspicion of conspiring to intercept mobile phone messages.

Thurlbeck and Edmondson were arrested after voluntarily presenting themselves at different police stations in south-west London.

Both men were later released on police bail to return in September. Their homes, as well as Thurlbeck's office and computer at the News of the World head offices, were searched by police.

It is believed Edmondson, who was sacked from the News of the World in January, and Thurlbeck have been implicated in the long-running scandal through documents seized from Glenn Mulcaire, the private investigator employed by the newspaper. Both Edmondson and Thurlbeck deny any wrongdoing.

In another major development, Keir Starmer QC, the director of public prosecutions, directly challenged the accuracy of evidence given to parliament by John Yates, the acting deputy commissioner of the Metropolitan police. Yates has repeatedly claimed there were only 10 or 12 victims of the affair, but evidence has emerged that police in 2006 knew of "a vast number".

Yates has told parliamentary inquiries four times that he used the lower number because prosecutors advised police to adopt a very narrow interpretation of the law, but in a detailed letter to the chairmen of two select committees, Starmer contradicted Yates's account of the legal advice, insisting that prosecutors "did not limit the scope and extent of the criminal investigation". The Labour MP Chris Bryant said Yates should now "consider his position" at the Met.

The DPP's letter was greeted by fury at Scotland Yard. His claim that police did not dispute the facts in his letter, setting out the timeline of legal advice given to detectives investigating phone hacking, left top officers "very, very angry".

In recent days, each side has been describing the other in increasingly vitriolic terms, bandying around words such as "disingenuous" and "lying" in private. Such a vitriolic and sustained dispute between senior officers and prosecutors is unprecedented, say sources in both organisations.

The News of the World until recently insisted that the only phone hacking carried out on behalf of the paper was by a "rogue reporter", Clive Goodman, and the only other arrests linked to the long-running saga took place in 2006, when Goodman, the News of the World's former royal editor, and two associates were arrested.

In January 2007, Goodman was given a four-month jail term and Mulcaire a six-month term for plotting to intercept voicemail messages left for eight public figures.

Suppressed evidence of further phone hacking was not revealed until a Guardian investigation in July 2009. Operation Weeting, which is responsible for Tuesday's arrests, is the third investigation into hacking run by Scotland Yard. Previous investigations failed to act on evidence that they obtained in 2006.

So far six reporters and executives have been publicly linked to the phone-hacking practice. In December, lawyers for the actor Sienna Miller obtained papers that implicated Edmondson in the hacking of her and eight of her friends and family. Thurlbeck's name was brought into the affair through an email that was disclosed to a select committee by the Guardian in July 2009 in which a News of the World reporter sent the transcript of 35 voicemails "for Neville".

In another separate development, Vodafone agreed to hand over call data relating to Miller, following a legal ruling that could set a precedent for other public figures suing the paper over allegations of phone hacking. The Met hopes Tuesday's arrests will prove to the public that the phone-hacking scandal is now being aggressively investigated. It hopes the arrests will allow a distance to be drawn between itself and the original investigation, which was heavily criticised. Deputy Assistant Commissioner Sue Akers, leading the new investigation, reportedly told one alleged victim, John Prescott, she was "not satisfied" with the original inquiry.

"Whatever the police did before on this investigation is water under the bridge. The new operation is doing a good, thorough job. If that shows that someone in the past did a bad job, then so be it," a source close to the inquiry said.

The arrests are also, the source claimed, proof that the operation is flourishing despite being under considerable pressure.

The team of 45 full-time detectives – more than triple the number deployed to investigate illegal expenses claims by MPs – is having to review all actions and decisions taken by the previous investigation.

News International said in a statement: "News International has consistently reiterated that it will not tolerate wrongdoing and is committed to acting on evidence. We continue to co-operate fully with the ongoing police investigation."

How the case unfolded



December 2005 Buckingham Palace asks police to investigate interference with mobile phone messages.

April 2006 CPS lawyer suggests police may need to adopt a narrow view of the law but adds "this area is very much untested and further consideration will need to be given". She also advises that the Computer Misuse Act could be used without any ambiguity.

June 2006 Police send file to the CPS confirming they are working with Computer Misuse Act as well as the Regulation of Investigatory Powers Act (Ripa).

28 July 2006 David Perry takes over as prosecuting counsel and advises CPS that Ripa is unclear and there is no need to take a view on its narrow interpretation unless defence raises it.

8 August 2006 Goodman and Mulcaire are arrested and charged with offences under Ripa.

October 2006 Goodman and Mulcaire plead guilty without questioning how Ripa should be interpreted.

March 2011 John Yates gives evidence to select committees, quoting early advice from CPS but not later advice from David Perry.