the biggest crisis yet faced by the Coalition.
But British Culture Secretary Maria Miller denied there is a big split in the cabinet, insisting there are merely "issues of implementation".
Cameron believes this process will only serve to highlight how difficult it is to try to legislate in a complex and controversial area while Labour and the Lib Dems think it will demonstrate the opposite.
Speaking on BBC Breakfast, Miller said: "Our concern is that we simply don't need to have that legislation to achieve the end of objectives and in drafting out this piece of legislation what we are going to be demonstrating is that it wouldn't be a simple two-clause bill.
" In a series of interviews, she said new laws setting up a press watchdog could ultimately stop newspapers properly reporting parliament and holding politicians to account in future.
"It provides a legislative framework for government to put in place things that impinge on press freedom, for example the way the press reports parliament," she said.
Meanwhile, media reform campaigners and some of those who had their phones hacked or computers compromised said they were "profoundly depressed" by Cameron's refusal to follow the recommendation of Leveson.
Speaking at a press conference organised by the Hacked Off campaign, the filmmaker Ed Blum – himself a victim of hacking – accused Cameron of abandoning those he had pledged to help.
"I think with Cameron's statement, he's let down the victims of press abuse," he said.
"He's also ripped out the heart and soul of the Leveson report and at the same time...," he was quoted as saying by the Guardian.
Mark Lewis, the solicitor who represents a number of phone-hacking victims, including the family of Dowler, said some of his clients were struggling to understand the prime minister's behaviour.
"The politicians were in on this and somebody independent was coming along and made recommendations and cautious optimism lasted for about 45 minutes and then the prime minister spoke and said well he's not actually going to implement a report that he instigated," Lewis said.
Meanwhile, following cross-party talks last night - which will resume next week - the Department for Culture,