Cameron's media supremo falls victim to phone-hacking row

Mr Coulson maintained he was unaware illegal activities were taking place when he was the newspaper's editor but said "when the spokesman needs a spokesman it's time to move on".

The departure of one of his closest aides is a blow to Mr Cameron, who has stood firmly by Mr Coulson despite continuing claims over his time at the newspaper.

The Prime Minister insisted Mr Coulson was being "punished for the same offence twice" after his departure was announced, but critics said the resignation was "long overdue".

Mr Coulson told the Prime Minister of his intention to resign on Wednesday, although the announcement was only made yesterday.

In his resignation statement he said continued coverage of events during his time at the News of the World "has made it difficult for me to give the 110 per cent needed in this role".

"I stand by what I've said about those events but when the spokesman needs a spokesman it's time to move on," he added.

Mr Coulson resigned as editor of the News of the World in 2007 after the paper's former royal editor Clive Goodman and private investigator Glenn Mulcaire were jailed for phone hacking.

Although he accepted ultimate responsibility for the illegal activities, he has always denied knowing they were taking place.

A subsequent Scotland Yard investigation resulted in no further charges.

However, several public figures are still pursuing civil legal actions against the newspaper – and documents disclosed in those cases have sparked fresh developments.

It emerged earlier this month that News of the World executive Ian Edmondson has been suspended as a result of claims in a case brought by actress Sienna Miller.

Police subsequently wrote to the newspaper asking for any new evidence staff had on the case.

The Crown Prosecution Service (CPS) has asked a senior QC to "comprehensively" re-examine material amassed as part of the original inquiry and any new evidence.

Former England footballer Paul Gascoigne is also reportedly preparing to sue the newspaper over claims his phone was hacked.

With the case refusing to go away, the issue has been a constant source of attack for political opponents who refuse to believe Mr Coulson. The timing of yesterday's announcement – while Tony Blair was appearing at the Iraq Inquiry, and with the fall-out of Shadow Chancellor Alan Johnson's departure still reverberating – led to claims of trying to "bury bad news", although Downing Street sources rejected that and pointed out that the story was topping news bulletins.

Last week Mr Cameron refused to confirm or deny reports that his communications director had offered to resign, but conceded that Mr Coulson was "extremely embarrassed" about the continuing claims.

Speaking to reporters yesterday, the Prime Minister said he believed Mr Coulson had been "punished for the same offence twice".

"He's run the Downing Street press office in a professional, competent and good way," he insisted.

"He's done an excellent, excellent job. I think he should be judged by that. This is all about the past. It's just gone on and on."

Mr Coulson's appointment and tabloid edge helped Mr Cameron modernise the Tory party, although there have been reports of growing tensions inside Downing Street with the Prime Minister's director of strategy Steve Hilton, a key proponent of the Big Society.

Labour leader Ed Miliband said the allegations surrounding Mr Coulson's time at the News of the World "raised real questions" about his ability to be at the heart of the Downing Street machine. "He's now done the right thing but he should have done it earlier. I think it raises real questions about David Cameron's judgment that he hung on to Andy Coulson for so long."