* Inquiry expected to recommend tighter media restrictions
* Cameron says Britain must keep a free press
* Newspapers seek to keep form of self-regulation
By Tim Castle
LONDON, Oct 7 (Reuters) - Prime Minister David Cameron said Britain would avoid "heavy-handed state intervention" of its national press after phone hacking victims urged him on Sunday to remain open-minded about the recommendations of an inquiry into media ethics.
Actor Hugh Grant, singer Charlotte Church and more than 50 other victims of press intrusion said in letter to Cameron they feared he had already decided to reject statutory regulation of the media before the inquiry's findings were published.
Cameron said he would not prejudge the inquiry and confirmed he had told Grant he would implement its recommendations providing they were "not bonkers".
"It's quite clear people have been abused, people's families and lives have been torn up by press intrusion. The status quo is not an option," he told BBC television.
Cameron ordered the wide-ranging investigation at the height of a scandal last year into illegal phone hacking at Rupert Murdoch's now-closed News of the World tabloid when it emerged that reporters had hacked the phone of a murdered schoolgirl.
The inquiry, led by judge Brian Leveson, revealed the inadequacy of British newspapers' current system of self-regulation and is expected to recommend a tougher regime to ensure victims of press intrusion can receive effective redress.
Leveson has yet to publish his findings after eight months of hearings that ended in July.
Cameron will have to navigate a difficult political path in responding to the recommendations to avoid being accused of trampling on press freedoms or being soft on tabloid excesses, especially given his close ties to two of those who have been charged with offences relating to phone hacking.
His ex-spin doctor Andy Coulson was a former News of the World editor and as was his friend Rebekah Brooks, who later oversaw Murdoch's News International arm. Their trial has been set for September next year.
"We don't want heavy-handed state intervention. We've got to have a free press," Cameron said.
"We all want to put in place a sensible, regulatory system. We're hoping that Lord Justice Leveson is going to crack this problem for us, but we must let him do his work first."
Some newspapers have proposed a beefed up form of contractual self-regulation as a way of avoiding statutory control, an approach the hacking victims rejected as inadequate.
Grant, a director of the Hacked Off lobby group that organised the letter to Cameron, said he wanted a new media regulator who would be independent of both the newspaper industry and government.
"It's actually the way solicitors are now regulated, it's the way doctors are now regulated, and they're not complaining," he told BBC television.
"I do not see the slightest danger to freedom of expression, freedom of speech from that."
(Editing by Alison Williams)
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Keywords: BRITAIN HACKING/