Newspaper industry proposals for the future regulation of the press in the wake of the hacking scandal have been rejected by ministers.
But Culture Secretary Maria Miller said that Conservatives were ready to make a number of changes to the Government's plan for a royal charter, in response to concerns raised by the industry during talks over the summer.
Mrs Miller will hold talks over the next two days with Labour and Liberal Democrats in the hope of securing agreement for an amended charter to be published on Friday and approved by the Privy Council on October 30.
Campaigners representing victims of phone hacking welcomed the "long overdue" decision to reject the alternative charter put forward by the industry, which has delayed progress on a blueprint for regulation agreed by the three major parties in March.
Brian Cathcart, director of pressure group Hacked Off, said it was time that newspaper publishers "stepped up and accepted what is a workable, fair solution that poses no threat whatsoever to freedom of expression in this country". Prof Cathcart said it was "regrettable" that further changes might be made to the cross-party charter and said he would be watching closely to ensure there was no "dilution" of the recommendations of last year's Leveson Report.
But the industry said it was "deeply disappointed" and warned that it was "impossible to see" how the Government's charter could comply with Leveson's recommendations, which envisaged "a body, established and organised by the industry which would provide genuinely independent and effective regulation of its members".
The industry proposals were considered yesterday by a sub-committee of the Privy Council, which found that they did not comply with some of the "fundamental principles" of the Leveson Report, Mrs Miller told MPs.
Sticking points included press opposition to a free arbitration service, which publishers fear could encourage frivolous complaints, as well as the industry's desire to have representation on a new "recognition panel" to be created by the charter.
Under the cross-party plans, the job of adjudicating on complaints and imposing penalties will be performed by a new self-regulatory body set up by the industry to replace the Press Complaints Commission. The panel would be required to verify whether this watchdog was effective and genuinely independent of publishers.
However, it would be up to individual publishers whether they are willing to sign up to a regulator endorsed by the panel, and there is speculation that many or all of the major newspapers may opt out of the proposed system if it does not address their concerns over freedom from political interference. The Conservative chairman of the Commons Culture Committee, John Whittingdale, today warned it would be "infinitely preferable" to establish a system which as many newspapers as possible are ready to sign up to.
In a statement responding to Mrs Miller's announcement, the Industry Steering Group representing newspaper publishers said: "We are deeply disappointed that the Privy Council sub-committee has rejected our charter proposal which set out criteria for tough and independent self-regulation with the support of virtually all of the newspaper and magazine industry."
The statement added: "T he Privy Council make it very clear that royal charter proposals are unlikely to succeed if they are the subject of controversy. Nothing could be more controversial than a royal charter imposed by politicians on an industry which is wholly opposed to it and which would fatally undermine freedom of expression."
Mrs Miller signaled that she is ready to give ground on two issues of concern to the press.
She is proposing to make provision for a fee for use of the arbitration service, which would be small enough to comply with Sir Brian Leveson's recommendation of a "low-cost" facility but large enough to deter speculative claims. It is thought the charge could be in line with fees for using the small claims court, which range between £35 and £685.
She also indicated that Conservatives are ready to accept the industry drawing up a code of conduct for editors, to be approved by the independent regulator's board. The cross-party charter currently envisages the code being written by a panel including editors, journalists and independent members, and subject to regular public consultation.
Labour and Liberal Democrats are ready to discuss these amendments, but made clear they would not accept a suggestion from Mrs Miller that they should also consider press appeals for industry representation on the recognition panel and the board of the regulatory body.
If no cross-party agreement is reached by Friday, the Culture Secretary made clear she will press ahead with the version of the charter agreed at a late-night meeting over pizzas in Whitehall on March 18 in the presence of Hacked Off, and later approved in a parliamentary vote.
In a statement to the Commons, Mrs Miller told MPs: "We have an opportunity to take a final look at our charter. An opportunity to bring all parties together and ensure that the final charter is both workable and effective.
"We have a responsibility to make sure that what we do here will be effective and stand the test of time, so we need to make it the best we can.
"We have a once-in-a-generation opportunity to get this right. We all want it to be the best we can do to give individuals access to redress whilst safeguarding this country's free press which forms such a vital part of our democracy."
Labour deputy leader Harriet Harman, who has represented the opposition in talks on press regulation, said that the cross-party charter should be put before the Privy Council when it meets tomorrow, and accused Prime Minister David Cameron of intervening to delay its submission until the end of the month.
"We regret this because there has been nearly a year since Leveson reported and six months since this House agreed the draft charter," she said. "There has already been too much delay... Let's have no further delay, let's get on and implement Leveson."