Cameron: UK working on «no-fly zone» plan for Libya
The prime minister said the threat of "further appalling steps" being taken by Col Muammar Gaddafi to oppress his own people was behind the talks.
He said he did not rule out "the use of military assets" in Libya and said the "murderous regime" must end.
Fewer than 150 British citizens are thought to remain in Libya and only a "very small proportion" want to leave.
The government would continue to do "all we can" to get them out, he said.
In a statement to MPs after returning from a tour of the Middle East, Mr Cameron said there was a "precious moment of opportunity" and in many parts of the Arab world "hopes and aspirations which have been smothered for decades" were surfacing.
He said they were "taking every possible step to isolate the Gaddafi regime".
’Military assets’
The UK has frozen Col Gaddafi’s British-held assets and those of his family, and withdrawn their diplomatic immunity and an export ban has been imposed on Libyan banknotes, which are printed in Britain.
Mr Cameron told MPs there would be "further isolation of the regime by expelling it from international organisations" and further use of asset freezes and travel bans to encourage those "on the fringes of the regime, that now is the time to desert it".
I do think it’s one thing we need to look at, look at it urgently and plan for, in case we find, as we may well do, that Col Gaddafi is taking further appalling steps to oppress his peopleâ€.
He added: "And we do not in any way rule out the use of military assets, we must not tolerate this regime using military force against its own people.
"In that context I have asked the Ministry of Defence and the Chief of the Defence Staff to work with our allies on plans for a military no-fly zone."
He said later they would comply with international law but planning for a no-fly zone had to start now because no-one knew what Col Gaddafi would do to his own people and one might have to be put in place "very quickly".
The Labour MP Ann Clwyd told him that a no-fly zone could "save thousands of lives if he’s [Col Gaddafi] going to bomb his own people from the air".
Mr Cameron said trying to secure a no-fly zone over a country as large as Libya was "not without its difficulties": "We would be trying to cover a vast area, it would take a serious amount of military assets to achieve it."
And he pointed out there were other ways for Col Gaddafi to attack Libyans, other than by helicopter gunship or by plan. "But I do think it’s one thing we need to look at, look at it urgently and plan for, in case we find, as we may well do, that Col Gaddafi is taking further appalling steps to oppress his people and that is why the conversations are taking place today."
’Day of reckoning’
Some 50 Britons and 150 foreign nationals have arrived in Malta on HMS Cumberland.
Meanwhile, Foreign Secretary William Hague has called for an immediate end to violence against anti-government demonstrators in Libya and warned Col Gaddafi’s supporters that there will be a "day of reckoning" for anyone involved in human rights abuses.
Addressing a meeting of the United Nations Human Rights Council in Geneva, Mr Hague said there must be "no impunity" for those involved in violence against protesters.
He said: "We have signalled that crimes will not be condoned, will not go unpunished and will not be forgotten.
"This is a warning to anyone contemplating the abuse of human rights in Libya or any other country: Stay your hand. There will be a day of reckoning and the reach of international justice can be long.
"We must now maintain the momentum we have attained to ensure that there can be no impunity for crimes committed in Libya and to help bring about an immediate end to the violence."
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