Editors and newspaper proprietors should face prison if their titles are found to have carried out phone hacking, the Labour peer and television personality Lord Sugar said yesterday.
The star of the BBC's The Apprentice said it was "ludicrous" to suggest that the editor of a national title did not know whether voicemail interception had been used to obtain stories.
His demand came amid renewed calls for a public inquiry into the phone hacking scandal and an announcement by Rupert Murdoch's News International that it has appointed a former High Court judge to preside over its compensation scheme for victims of eavesdropping by the News of the World.
Lord Sugar told the House of Lords: "In the past a journalist was actually given a custodial sentence for phone hacking. Isn't it the case that the editor is responsible for what goes in the newspaper and he also should be given a custodial sentence, and indeed the proprietor and the board of directors?"
Andy Coulson, editor of the NOTW from 2003 to 2007, resigned from his post in the wake of the phone-hacking scandal but has always denied having any knowledge of the practice under which Glenn Mulcaire, a private detective, obtained the confidential voicemail numbers of public figures.
One of those figures, actor Hugh Grant, revealed yesterday that he has to have his car swept for bugs because of the attention he gets from tabloid journalists. Asked about the measures he had to take to protect himself from intrusions into his privacy, Mr Grant told BBC Radio 4's PM programme: "You have to be careful how you arrange your mobile phone, who it's done through and who you give your number to, because they are on you all the time."
Operation Weeting, the third Scotland Yard investigation into hacking, is contacting large numbers of suspected victims of voicemail interception, including News International's chief executive, Rebekah Brooks, to show them documentation seized from Mr Mulcaire.
Lord Fowler, the Conservative ex-Cabinet minister and former journalist on The Times, added to calls for an inquiry into illegal newsgathering and described phone hacking as a "massive conspiracy against the public".
In a move aimed at curtailing the civil phone-hacking cases against the NOTW, News International revealed details of its compensation scheme, including an offer to add an extra 10 per cent in damages to any settlement in return for avoiding the cost of court proceedings.
The company said Sir Charles Gray, a former High Court judge who once presided over the NOTW's match-fixing libel battle with the Liverpool goalkeeper Bruce Grobbelaar, will act as the independent adjudicator for the scheme, assessing how much a court would have ordered in damages to each victim.
Meanwhile, it has emerged that Julian Pike, the senior lawyer at Farrer & Co who was leading News International's defence
, has gone on a three-month sabbatical "for personal reasons".