Britain tells press to change ways to avoid new laws
* Lawmakers disagree over law for newspapers
* PM Cameron opposed to statutory regulation
* Inquiry said new watchdog needs legal backing
LONDON, Dec 3 (Reuters) - The British government on Monday threatened the press with new laws to curb its behaviour if it failed to get its own house in order following a damning inquiry into reporting practices.
Lawmakers are divided on the issue of statutory regulation which has put Prime Minister David Cameron at odds with his coalition partner.
Last week, the judge who oversaw a year-long inquiry after a phone-hacking scandal at Rupert Murdoch's British newspaper business called for a new press watchdog to police the sometimes "outrageous" behaviour of the press.
Lord Justice Brian Leveson said the new regulator should be backed by legislation to end a journalistic culture that had at times "wreaked havoc with the lives of innocent people".
That angered newspapers and many members of parliament who said state intervention in the press was a risk to free speech, a view shared by Cameron.
But Culture Secretary Maria Miller told parliament the press had to show it had taken on board the key suggestions from Leveson or a new law would follow.
"We will take action which would be along the lines set out in the Leveson report if action is not taken. That ... would include legislation," Miller said. "We will not accept a puppet show with the same people pulling the same strings."
Cameron and many in his Conservative Party are opposed to any statutory measures for the press, while the Liberal Democrats, the junior coalition partner, are in favour.
The behaviour of Britain's tabloid press has come under scrutiny in recent years as it used increasingly intrusive tactics to beat the competition to stories.
The prime minister had promised victims of press intrusion that he would support Leveson's proposals provided they were not too extreme. They now accuse him of going back on his word and being in the pocket of media barons.
Cameron's stance has won him gushing praise from previously hostile newspapers as his party trails the opposition Labour Party in polls.
The government is trying to push through unpopular austerity measures ahead of the next election in 2015.
Miller, who will meet newspaper editors on Tuesday to discuss their response said she had grave concerns about a new press law, but had not ruled it out.
"We live in one of the least corrupt societies on earth, can I congratulate her (Miller) and the prime minister on doing everything possible to avoid statutory regulation of the press," said Conservative lawmaker Graham Stuart.
The government is putting together draft legislation, which opponents of the law believe will demonstrate how complicated it would be to draw up in practice.
Miller is also holding cross-party talks to find a way forward, but Labour's leadership has vigorously affirmed that only a new press regulator backed by law would suffice.
"It is a complete contradiction in terms for people to say I want to implement Leveson without statute. Leveson says statute is essential," Harriet Harman, Labour's deputy leader told parliament.
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