Mr Blair said he was determined to find a way through
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Prime Minister Tony Blair has promised a decision next week on whether Catholic adoption agencies will be able to opt out of gay discrimination laws.
He said there could be a Commons vote, saying it was important to find "a way through this sensitive...issue".
Earlier, Education Secretary Alan Johnson said any opt-out would mean "plain, simple discrimination".
But Cardinal Cormac Murphy O'Connor said the rules went against Catholic teachings and agencies would close.
'Good record'
In a statement, Mr Blair said: "Both gay couples and the Catholic agencies have high levels of success in adopting hard-to-place children.
"It is for that reason we have taken time to ensure we get these regulations right.
"How do we protect the principle of ending discrimination against gay people and at the same time protect those vulnerable children who are at the present time being placed through - and after care provided by - Catholic agencies who everyone accepts do a great job with some of the most disturbed youngsters?"
The agencies say they will close if not given an opt-out from having to place children with gay couples, which they say goes against their beliefs.
The Equality Act, due to come into effect in England, Wales and Scotland in April, outlaws discrimination in the provision of goods, facilities and services on the basis of sexual orientation.
Mr Blair said: "The new regulations provide a massive step forward in ending discrimination against gay people."
'Last aspect'
He added: "These regulations will extend further anti-discrimination legislation. We are clear about what we want to do.
"There is one last aspect within the new regulations to resolve and it concerns adoption."
Ahead of the Thursday Cabinet meeting Mr Johnson told BBC Radio 4's Today programme: "I don't think there's a way through that allows any exemption."
Newspaper reports that Tony Blair had "caved in" to Cabinet members against an exemption have been described as "ridiculous" by Downing Street.
When asked if Communities Secretary Ruth Kelly, herself a Catholic, might see a case for an exemption, Mr Johnson said: "No... Ruth has tried very hard to find a way through this and that's her job to do that."
Ms Kelly has previously said her own religion would not prevent her from doing her job of tackling discrimination of all types, including that against homosexuals.
Mr Johnson said: "I'm convinced that I don't see a case for exemption and I don't think the prime minister does."
Harman
The Church of England has backed the Catholic Church.
Archbishop of Canterbury Rowan Williams and the Archbishop of York, John Sentamu, have written to Tony Blair to argue that "rights of conscience cannot be made subject to legislation, however well-meaning".
The Muslim Council of Great Britain also declared its support for the Catholic position, with secretary general Muhammad Abdul Bari saying: "As Muslims we are obliged to uphold the moral standards and codes of conduct dictated by our faith."
But Constitutional Affairs Minister Harriet Harman said there was no scope for exemptions to the legislation.
"You can either be against discrimination or you can allow for it. You can't be a little bit against discrimination," she told the New Statesman magazine.
The Catholic Church's agencies are said to handle 4%, or about 200, of all adoptions a year. However they handle about a third of those children judged difficult to place.