The Guardian alleges that thousands of high profile figures - including ex-deputy PM John Prescott - had their mobile phones hacked in to by the paper that Coulson edited until January 2007.
Labour insiders have told PRWeek of the party's plans to target the former tabloid editor. One senior Labour source in regular contact with Gordon Brown's inner circle said: ‘Cameron wants to present himself as the man who's going to clean up politics. That's going to be difficult if the public think his right-hand man is a complete sleazeball.'
Another Labour insider said that senior party figures had been thrashing out a strategy to target Coulson since the news emerged yesterday. The source said the aim was have Coulson ‘wounded, but still there'.
The source added that if Coulson was to hang on by Cameron's side, then Labour would be able to target him heavily him during last four weeks of a general election campaign.
PM Gordon Brown is believed to be especially keen to target Coulson, who he blames personally for a number of Tory attacks on his character, including branding the PM a ‘ditherer'.
The Commons culture, media and sport select committee has also announced it will reopen an inquiry in to phone tapping and may call Coulson to give evidence.
But the Tories were given a boost yesterday when Met Assistant Commissioner John Yates said Scotland Yard would not investigate the fresh allegations.
Tory leader David Cameron is standing by Coulson. He said on Friday: ‘The work he has done for me, for the Conservatives, has been beyond reproach.'
He said Coulson did the responsible thing in resigning from the News of the World for what happened ‘on his watch', and added that he ‘took the view that it was the reasonable thing to do' to give the former News of the World editor a second chance.
Speaking on BBC1's Question Time on Thursday evening, shadow culture secretary Jeremy Hunt accused other parties of ‘political opportunism' over the issue.
Hunt said: ‘The reality is that Andy Coulson stepped down from editing the News of the World and he did it because he was taking responsibility for something he did not know about but something he wanted to take responsibility for... He has behaved totally honourably.'
A number of Labour figures have called for Coulson to be sacked, but perhaps the most ferocious attack on Coulson to date has been unleashed by Lib Dem home affairs spokesman Chris Huhne.
He told the Commons yesterday: ‘It's extraordinary that the leader of the opposition, who wants to be a prime minister, employs Andy Coulson who, at best, was responsible for a newspaper that was out of control and, at worst, was personally implicated in criminal activity.'
Huhne added: ‘The exact parallel is surely with Damian McBride. If the Prime Minister was right to sack Damian McBride, should the leader of the opposition not sack Andy Coulson?'
However, many political commentors now expect that Coulson will be safe.
The Independent's Steve Richards wrote on Friday that Coulson was in a much stronger position than McBride, who was recently forced to quit as Gordon Brown's special adviser:
'In McBride's case there was no get-out clause: The proof was in front of everyone's eyes. In the case of Coulson we have no direct evidence of guilt.
'If that remains the case he will survive, especially in the light of Cameron's endorsement. But he will do so in a new context in which he is part of a running news story, now that the police and parliamentary committees have announced new investigations.'
On the website politicalbetting.com, the respected blogger Mike Smithson said: ‘Unless there are new revelations or something comes out that sticks something we didn't know already to Coulson then it's hard to see it going much beyond next week.
'The Guardian seems to be trying to widen it to the whole way that the media operates which suggests that they have not got anything new on the ex-NOTW editor.'
Coulson took the job of Conservative Party communications director in July 2007. In a statement, Coulson focused on one element on the Guardian's exclusive. He said: ‘This story relates to an alleged payment made after I left the News of the World two and a half years ago. I have no knowledge whatsoever of any settlement with Gordon Taylor.'