The biggest inquiry ever launched into child sex abuse in Britain has been launched by the government following the Jimmy Savile and Rolf Harris cases and claims that a Westminster paedophile ring was covered up.

Home secretary Theresa May announced that the head of the National Society for the Prevention of Cruelty to Children (NSPCC), Peter Wanless, would immediately start a full-scale investigation into how her predecessors dealt with the original "missing dossier," alleging a paedophile ring in politics in the 1980s.

That dossier is said to include "explosive" allegations and name senior politicians from the time as being involved in abuse and MPs want political party whips to reveal any information they might have about their own MPs.

That inquiry will also look at whether the infamous Paedophile Information Exchange (PIE) was in any way funded by Whitehall grants. It will report to her and the director of public prosecutions within eight to 10 weeks. An earlier inquiry found no evidence of such funding.

A second, more wide-ranging independent inquiry would be created with a panel of experts to look at the state's duty of care to victims of abuse, which will be turned into a full public inquiry if deemed necessary.

That wider inquiry echoes the Hillsborough-style probe urged by Labour MPs but initially resisted by the government.

It will look at bodies including the BBC and the NHS and possibly even the Church, and is unlikely to report before the 2015 general election but will update MPs before then.

May said her aim was to ensure ongoing police investigations were not jeopardised, that there must be the maximum transparency and that previous failures should be identified - and lessons learned.

"I want to be clear that the inquiry panel will have access to all the government papers, reviews and reports it needs. Subject to the constraints imposed by any criminal investigations, it will be free to call witnesses from organisations in the public sector, private sector and wider civil society," she told MPs.

Earlier, prime minister David Cameron had expressed his determination to get to the bottom of all the latest allegations and that no stone would be left unturned.

Ministers have been under immense pressure to act in the wake of claims by MPs that senior political figures were abusers and involved in a paedophile ring operating "in and around Westminster" in the 1980s.

A dossier presented to then-Home Secretary Leon Brittan by former Tory MP Geoffrey Dickens was viewed at the time, with elements passed to the police, but no action ever followed.

Much of that documentation has since gone missing and added to allegations of an establishment cover-up to protect senior politicians.

Brittan has insisted he followed all the proper procedures but Labour's Simon Danczuk recently told a Commons committee that politics was "the last bastion of child abuse deniers".

He helped expose the abuse by former Liberal MP Cyril Smith and, along with Labour's Tom Watson, has been in the forefront of demanding a full Hillsborough-style inquiry.

Ministers originally ruled that out on the grounds it might interfere with ongoing police investigations, but May confirmed she had been persuaded to change her mind.

Danczuk welcomed the inquiry and repeated his view there had been an informal, organised paedophile ring in Westminster which included senior politicians, some of whom were still around today.