Newspaper owners would face fines of up to £1 million under a proposed new system of press self regulation, an inquiry into journalistic standards has heard.

A regulator would be able to impose maximum fines where there had been "systematic breakdowns in ethical behaviour or internal governance", the Leveson Inquiry was told.

Inquiry chairman Lord Justice Leveson was told that a "completely new" system had been proposed by the head of current press watchdog the Press Complaints Commission (PCC), and been backed by "the constituent parts" of the newspaper and magazine publishing industry.

Lord Black of Brentwood, chairman of a publishing industry co-ordinating body, said there would be "ladders of sanctions" under the proposals put forward by PCC chairman Lord Hunt.

"For the bulk of complaints, an expert conciliation mechanism will provide swift and effective resolution," said Lord Black, chairman of the Press Standards Board of Finance, a co-ordinating body for the newspaper and magazine publishing industry's trade associations, in a written witness statement.

"At the other end of the scale, where there have been systematic breakdowns in ethical behaviour or internal governance, the (regulatory body) will be able to levy proportionate fines of up to £1 million."

Lord Hunt added, in a witness statement: "I hope that a tougher, more proactive new system would not only deal robustly with extremely egregious cases once they had occurred; it would also serve to prevent them ever happening, by changing attitudes and newsroom cultures."

Both men said self-regulation was a better way of policing the newspaper industry than statutory regulation.

Lord Hunt said in his witness statement: "I do ... have genuine and profound misgivings about directly involving the state - ministers, civil servants or even parliamentarians - in anything that might chill freedom of expression arbitrarily and unnecessarily."

Lord Hunt said he had been "uncomfortably aware", since becoming PCC chairman last year, that the concept of press self regulation had become "tainted and discredited" in the eyes of many people

But he said "true" self regulation had not been attempted and the PCC had been "damned for failing to exercise powers it never had".

"Although the PCC does possess some qualities of a regulator, it is primarily a complaints-led organisation," he added. "That is not comprehensive self regulation; it is complaints handling."

Lord Hunt added: "The new regulator must be the scourge of the bad, the irresponsible and downright cruel, but it should also be the stout friend and the unrepentant defender of good, decent, hard-working journalists."

He said much of the "decline in press standards" in recent years had come about because "law enforcement bodies" failed to take action.

Lord Hunt said some editors "seemingly came to believe" that contempt laws were "not important".

He said the press was subject to a "formidable corpus" of legal and regulatory structures, but to be effective "laws must be used".

"Much of the decline in press standards over recent years has resulted not only from the absence of effective press regulation but also from the failure of law enforcement bodies to take action using laws and powers already available to them," said Lord Hunt in his statement.

"An excellent illustration would be the laws on the contempt of court, which were effectively allowed to lie fallow for years. Some editors seemingly came to believe those laws were not important, because there were never any challenges to their conduct under them."