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Internet service providers will not be forced to disconnect users who repeatedly flout the law by illegally sharing music and video files, The Times has learnt.

Andy Burnham, the Culture Secretary, said last year that the Government had “serious legislative intent” to compel internet companies to cut off customers who ignore warnings not to pirate material.

However, in an interview with The Times, David Lammy, the Intellectual Property Minister, said that the Government had ruled out legislating to force ISPs to disconnect such users.

Speaking ahead of the publication of a report on the future of Britain's digital industries, Mr Lammy said that there were very complex legal issues wrapped up in enforced disconnection. He added: “I'm not sure it's actually going to be possible.”

Plans to combat internet pirates were stalled after a consultation by the Department for Business Enterprise and Regulatory Reform (BERR) showed there was no consensus between ISPs and the music industry as to how to deal with the seven million British internet users who share files illegally each year.

The BPI, the body that represents the British record industry, wants all ISPs to sign up to a “three-steps policy” by which repeat offenders are disconnected if they fail to stop sharing copyrighted material. Lord Carter, the Communications Minister, is to reveal his thoughts on the problem of illict file sharing in his Digital Britain report. The document was due to be released today but, because of a “ministerial quagmire”, is expected to be released on Thursday.

Suggestions have emerged that Lord Carter will order the founding of a “rights agency”, funded by a levy on service providers, to address the problem of piracy, or that he may suggest additional charges on customers' broadband bills to compensate the music industry.

However, industry sources said that changes between various drafts of the document meant that some options may have fallen out of favour.

In July last year the music industry and ISPs drew up a memorandum of understanding in which the ISPs agreed to send 1,000 letters a week for three months to combat users caught sharing files illegally.

The memorandum also created a series of working groups dedicated to bringing the two industries together to solve the problem of illegal peer-to-peer networks, which the music industry says costs its members £180million a year.

The ISPs believe that new business models and greater public education will help to solve the problem. They oppose any solution that involves new regulatory burdens being imposed on them. The Government, with the support of the music industry, favours a co-regulatory resolution, under which both parties agree to a code of conduct which is backed up by a regulator, such as Ofcom.

Mr Lammy, who has begun a big consultation entitled Developing a Copyright Agenda for the 21st Century, said that there was a big difference between organised counterfeiting gangs and “younger people not quite buying into the system”. He said: “We can't have a system where we're talking about arresting teenagers in their bedrooms. People can rent a room in an hotel and leave with a bar of soap - there's a big difference between leaving with a bar of soap and leaving with the television.”

He said he hoped the memorandum of understanding would mean that the Government did not have to apply “the heavy hand of legislation”.

Music industry figures said they were disappointed by Mr Lammy's comments. One senior figure said: “The relative cost of stealing a bar of soap from an hotel might be small, but if it came to seven million people nicking the soap each year, which is what we have in the music industry, I'm sure that hotel chain would do something about it.”

ISPs, on the other hand, welcomed the news. British Telecom said: “We're still hopeful that an amicable solution, without the need for legislation, can be reached. It doesn't make sense to try to get people online and at the same time scare them away.”

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