In a scathing attack, the Prime Minister branded the media watchdog was “ineffective,” “lacking in rigour” and “institutionally conflicted.”
Speaking at a Westminster press conference, Mr Cameron said a replacement body should be independent of the press so that “newspapers will never again be solely responsible for policing themselves.”
But the PCC hit back claiming its work had been “undervalued” and accusing the Prime Minister of seeking a “convenient scalp.”
Mr Cameron said: “Let’s be honest: the Press Complaints Commission has failed. In this case – in the hacking case – it was, frankly, completely absent.
“Therefore we have to conclude that it is ineffective and lacking in rigour. There is a strong case for saying it is institutionally conflicted, because competing newspapers judge each other.”
Mr Cameron confirmed the establishment of a wide-ranging inquiry into press behaviour, regulation and ethics alongside the judge-led inquiry into the phione-hacking scandal.
He said it would be up to the wider media industry inquiry to recommend a new regulatory framework but the Prime Minister insisted it would be independent of both the press and politicians.
“My starting presumption is that it should be truly independent. Independent of the press, so the public will know that newspapers will never again be solely responsible for policing themselves,” said Mr Cameron.
“But vitally, independent of government, so the public will know that politicians are not trying to control or muzzle a press that must be free to hold politicians to account.
“This new system of regulation must strike the balance between an individual’s right to privacy and what is in the public interest.
“And above all, it should uphold the proper, decent standards that we expect.”
The PCC issued a swift response, welcoming the establishment of the inquiry.
“We are confident that such an inquiry will recognise the considerable successes of the Press Complaints Commission, to which the Prime Minister himself referred some weeks ago,” it said in a statement.
“We do not accept that the scandal of phone hacking should claim, as a convenient scalp, the Press Complaints Commission.
“The work of the PCC, and of a press allowed to have freedom of expression, has been grossly undervalued today.
“However, as the PCC has said consistently, it believes that the outcome of phone hacking should be a more independent PCC. It is confident that it is precisely what the Prime Minister’s inquiry will also have to conclude.
“There should be fundamental reform of the system, as we have already recognised and called for. But the PCC can, in the final evaluation, play its part in this.
“Now, it is for the newspaper and magazine industry itself to make the case for their continued independence from Government.
“Meanwhile, the dedicated staff of the PCC will continue to serve the public (a service that effectively helps thousands of people every year), and uphold the ethical standards enshrined in the Code of Practice.”
“In addition to The News of the World there were 20 odd national newspapers and 1300 local and regional papers across the country and that it was a nonsense to suggest that ethics in all of them had broken down or that the PCC system was broken beyond repair,” he said.
“The role that the PCC played will come out in the inquiry. The report they put out was wrong and they accepted that. They also did a lot of behind the scenes work at the time. The News of the World and other papers made sure the practices didn’t happen again.
“Things will change, the PCC has accepted that. If people keep an open mind we may come out of it with some sensible outcomes and we can draw some conclusions.”
Earlier Labour leader Ed Miliband said the media watchdog had been exposed as a “toothless poodle” and should be replaced.
“The Press Complaints Commission has totally failed. It failed to get to the bottom of the allegations about what happened at News International in 2009,” he said.
“Its chair admits she was lied to but could do nothing about it. It was established to be a watchdog. But it has been exposed as a toothless poodle. It is time to put it out of its misery.
“A new body would need: far greater independence of its board members from those it regulates; proper investigative powers; and an ability to enforce corrections.”
The PCC responded in a statement: “It is wrong of Mr Miliband to call for the scrapping of the PCC. His remarks are long on rhetoric and short on substance.
“However, he is right to support self-regulation and to say that the phone hacking scandal should act as a catalyst for improvement and reform of the industry.”