Nick Clegg signalled today that key elements of control orders would be reformed as he pledged to "resurrect" civil liberties in Britain.
But the Deputy Prime Minister admitted that the controversial restrictions would not be removed altogether, because a "small number" of dangerous terror suspects could not be dealt with by the traditional justice system.
The comments came after intense wrangling within the coalition over what to do about control orders. The Liberal Democrats promised to scrap them at the General Election, but many Tories believe they are necessary to keep the public safe.
Delivering a speech on civil liberties in central London this morning, Mr Clegg insisted it was "nonsense" to suggest that decisions on anti-terror measures were being taken through a "party political prism".
The Government's first duty was "to keep the British people safe" and the threat from terrorists was "very, very real".
But he added: "I don't think it's justifiable to impose virtual house arrest without having to charge or convict someone first.
"I think it's very clear it's one of the current flaws we are seeking to address, but at the same time you have to deal with the inescapable reality that there are a small number of people who want to cause immense damage to us who, for one reason or another, good or bad, we cannot get to court."
He went on: "One thing I can predict safely is that, for people who think control orders as they are, are perfect, they will be disappointed. For people who think they should be scrapped altogether, they will be disappointed as well.
"It's clear that there are some very hard measures in the existing control orders. I am going to change it. What I am not prepared now to say is what aspect of the regime is going to change."
He said he was "deeply, deeply uncomfortable" with virtual house arrest.
In his speech, Mr Clegg launched a searing attack on the previous government's record on civil liberties. "They made Britain a place where you could be put under virtual house arrest when there was not enough evidence to charge you with a crime, and with barely an explanation of the charges against you," he said.
He branded many of Labour's anti-terror measures "disproportionate in design and ineffective in practice".
"If you need any proof of that, just look at control orders ... remember how they originally came about as an ad hoc and rushed response to a number of court rulings," he said.
"The creation of virtual house arrest for people who could not be tried in court. The departure from our long held commitment to open justice. And what is worse, as the Prime Minister pointed out earlier in the week, they didn't even work."
Mr Clegg went on: "The question we must ask ourselves is this - are the tools we have to combat terrorism effective and do they help rather than hinder bringing to justice those who seek to destroy our way of life?"
Mr Clegg insisted there was not a "straightforward trade-off between liberty or security, as if one must come at the expense of the other".
"It is about how we balance the two. How we underpin both. And how we can make sure people who break the law and seek to do us harm are charged, convicted, and put in prison."
He also played down suggestions that a major rift had developed within the coalition on the control order issue.
"The Government has not been consumed by some sort of almighty row between peaceniks on the one hand and securocrats on the other," he said. "We are determining, together, with painstaking care, how to keep people safe in a way that upholds our values and traditions."
The Deputy Prime Minister added: "Control orders cannot continue in their current form. They must be replaced."
Lib Dem peer and former Director of Public Prosecutions Lord Macdonald has been carrying out a review of control orders, which is due to report soon.
Mr Clegg said both coalition partners believed the 28-day period terror suspects can be detained without charge was "too long and we should seek ways to reduce it".
The Lib Dem leader also confirmed well-trailed proposals to extend freedom of information rules, and reform the libel laws.
He said English libel laws were having a "chilling effect on scientific debate and investigative journalism".
"This government wants to restore our international reputation for free speech. We will be publishing a draft defamation bill in the spring," he said.
"We intend to provide a new statutory defence for those speaking out in the public interest. And to clarify the law around the existing defences of fair comment and justification.
"We believe claimants should not be able to threaten claims on what are essentially trivial grounds. We are going to tackle libel tourism.
"And we're going to look at how the law can be updated to better reflect the realities of the internet."
Mr Clegg promised to "address the high costs of defamation proceedings", with proposals to restrict controversial "no-win no-fee" arrangements.
"Our aim is to turn English libel laws from an international laughing stock to an international blueprint," he will insist.
"My party spent years campaigning against the erosion of our civil liberties under Labour," Mr Clegg said.
"And now, in government, we are going to turn a page on that chapter; resurrecting the liberties that have been lost; embarking on a mission to restore our great British freedoms."