Ministers ordered a public inquiry yesterday after a damning report levelled allegations of corruption and spying on police investigating the racist murder of Stephen Lawrence.

Home Secretary Theresa May said a judge would lead the probe into Mark Ellison QC's "deeply troubling" findings that the Met had placed an undercover officer in the "Lawrence camp" during its long campaign for justice.

Mr Lawrence's father Neville said the inquiry was "21 years overdue."

Mr Ellison had been tasked with investigating corruption claims during the initial investigation but his remit was extended after former Special Demonstration Squad officer Peter Francis said he'd been deployed undercover to dig up information that might "smear" the family.

The SDS, a top-secret squad within Special Branch from 1968 to 2006, focused on infiltrating campaign groups and has been at the centre of a series of allegations of wrongdoing and incompetence.

Mr Ellison found that an SDS "spy" was working within the "Lawrence family camp" during the landmark judicial inquiry led by Sir William Macpherson into Stephen's death that accused the Met of "institutional racism" at the time of the teenager's death.

The mere presence of an undercover officer was "highly questionable," said Mr Ellison.

His report said undercover officer N81 had met acting detective inspector Richard Walton, who had been seconded to the Met's Lawrence review team responsible for making submissions to the Macpherson inquiry.

The meeting was "a completely improper use" of intelligence, said Mr Ellison.

"We find the opening of such a channel of communication at that time to have been wrong-headed and inappropriate."

The review also found evidence that one of the detectives on the original Stephen Lawrence murder investigation, detective sergeant John Davidson, had acted corruptly both before and after he worked on the investigation.

The McPherson inquiry should have been made aware of the suspicions but was not, he said.

Neville Lawrence said: "Mark Ellison's report has simply corroborated what I have known for the past 21 years and our long fight for truth and justice continues."

Stephen's mother Doreen added: "I'm not shocked. It's something I suspected all along."

She was in the Commons public gallery as Ms May told MPs of plans to introduce a new criminal offence of police corruption - rather than misconduct in a public office.

Stephen Lawrence was stabbed to death by a group of up to six white youths in an unprovoked racist attack at a bus stop in Eltham, south-east London, on April 22 1993.

In January 2012 two men, Gary Dobson and David Norris, were jailed for life for their roles in his murder.