Sunday Times editor defends use of blagging by reporters but Alan Rusbridger says 'libel problem' must be addressed

The editors of the News International-owned Times and Sunday Times have told the Leveson inquiry they were implacably opposed to any form of statutory regulation of newspapers because of the "chilling effect" it may have on the press.

Six months after the phone-hacking scandal erupted, the editors of the now defunct News of the World's sister titles said they supported radical reform of press regulation but not through legislation.

Their evidence to the inquiry on Tuesday contrasted with that of the Guardian's editor-in-chief, Alan Rusbridger, who was also testifying. He has proposed a "regulator with teeth" and a statutory underpinning.

James Harding, the editor of the Times, told Leveson that any new press regulator needed to be "muscular and independent" but he feared the judge's landmark investigation into press ethics would lead to an act of parliament that would stifle the press.

"We don't want a country in which the government, the state, regulates the papers … we don't want to be in a position where the prime minister decides what goes in newspapers," he said.

He added that if the outcome of the inquiry was a "Leveson Act", even one just offering a statutory backstop to an independent press regulator, politicians would be given unacceptable power over the press.

Harding said his concern was that such an act of parliament would give a "mechanism to politicians to loom over future coverage" of politics. The temptation to introduce amendments to this legislation "would have a chilling effect on the press", he added.

His views echoed those of the recently appointed chief executive of News International, Tom Mockridge, who was also giving evidence on Tuesday. "Once the state intervenes, the state intervenes," he said.

He told Leveson the UK "enjoys something precious and something I would say many people in other countries would look up to".

Mockridge, who worked for the News International proprietor, Rupert Murdoch, in Italy, New Zealand and Australia before being asked to take over from Rebekah Brooks at News International at the height of the phone-hacking scandal last July, also told Leveson that many outside the UK "look at the British press with jealousy due to the extent of competition and choice in the marketplace".

John Witherow, the Sunday Times editor, said he would have "very serious doubts about some sort of statutory body that's been set up by parliament" because he thinks further down the line "politicians would be tempted to intervene".

Both Harding and Witherow gave the example of the BBC's coverage of the "dodgy dossier" on weapons of mass destruction in Iraq and the ensuing battle with the government.

Witherow said the "huge furore" that eventually led to the resignation of the BBC's chairman and director general was because "number 10 thought they had some stake and some control in the BBC".

If this were repeated in the newspaper world, and the government had any sort of statutory controls, "they would be sorely tempted in a similar row to take some action because they already had a beachhead".

Leveson spent much of his own questioning time trying to draw both the News International executives and the Guardian's editor into a firmer definition of a future-proof regulatory system.

Lord Justice Leveson said his big concern was to find a system that would work for the press and the public in the long term. "I am struck by the history of these sorts of exercises [reviews of press regulation], the number of times it has happened since the war. I don't think it's very good for the country and I don't think it's very good for the press," Leveson said.

He said it wasn't good enough to have an inquiry and see an "immediate improvement" in the behaviour of the press following one ethics scandal only to be followed by "a gradual drift" back to old ways until the next ethical scandal.

"The system has to be sufficiently robust to cope with the trouble, so that in 10 years' time we don't have to do the whole thing again."

Rusbridger said there was confusion over what statutory regulation meant and he wouldn't be against the use of statute if, for example, it was compulsory to submit yourself to adjudication by an independent body before going to the courts.

"I would have thought this was something the industry ought to welcome because it's going to help us out of this problem of libel."

The Guardian editor said: "We all reject anything that looks like statutory licensing and we reject anything that looks like politicians or the state having any kind of say in the content of newspapers."

He added: "The blunt truth about our industry is we have been under-regulated and over-legislated and if we can get a better balance of better legislation and better regulation as a result of it, then that to my mind is a good thing."

"The system has to be sufficiently robust to cope with the trouble so that in 10 years' time we don't have to do the whole thing again."

When asked about the way forward for press regulation, Rusbridger said he backed the idea of sending an ombudsman into newspaper newsrooms to investigate claims of wrongdoing.

"I think that idea of where there's prima facie evidence that something has systemically badly gone wrong within a newspaper, the idea of sending a figure like that in, whose credibility is going to be dependent on not having the wool pulled over their eyes … is quite a good one and that the organisation [where something has gone wrong] should bear the cost of that."

Rusbridger was not asked questions about the Guardian's report, which has since been amended, that News International was responsible for deleting voicemail messages on the phone of the murdered schoolgirl Milly Dowler because the inquiry is still collecting evidence on the issue.

Leveson said: "Although I'm very keen to bring all that out into the open, I don't want to get sent down a siding which diverts me from the important task which I've been given."

Rusbridger said establishing exactly what had happened in March and April 2002 was "a complex question" and suggested that not all relevant evidence had yet been made available.

He added: "I think there are people who are trying to elevate this into a primary issue now who didn't think it was at the time … when you track back the reasons that were given for the closure of the News of the World at the time, they certainly weren't that."

Harding said he hoped Leveson would come up with a new framework that would ensure the press "treats people better in the future" by giving them "meaningful redress" if they were wronged.

He said he also supported a new press regulator with powers to investigate and to punish newspapers that had been in the wrong.

He defended his own newspaper's record of reporting the phone-hacking scandal and said it had not pursued it as intensely as the Guardian, not because the paper was a sister title to the News of the World but because his proprietor and the police were pouring cold water on it when it first broke in 2009.

A 1,800-word leader in the Times on Tuesday conceded that News International was "unable or unwilling to police itself" and that its failure to do so was "a disgrace".

Witherow defended the use of blagging and subterfuge in the public interest. He said he believed a former actor was used by his investigative team of the Fifa corruption scandal.

"Generally, it's [subterfuge] fairly clear cut," he told Leveson in reciting examples of criminality and wrongdoing by MPs.

Harding revealed that Murdoch was a frequent caller and had taken a particular interest in the paper's coverage of the eurozone crisis. "In the runup to Christmas, we spoke quite often because he was very interested, as was I, in what was happening in the Eurozone," he said.

The inquiry also head from News International's chief financial officer, Susan Panuccio, who said cash payments had dropped substantially since the scandal over phone hacking had blown up. In the past six months only £50,000 has been issued in cash for stories.

The highest cash payment the company had made for a story since she was appointed in 2008 was £150,000 for the 2010 News of the World cricket matching fixing scoop.

Mockridge told the inquiry in separate written evidence that the company was recently given the go ahead from the Metropolitan police to start conducting its own internal investigation into the News of the World. This will cover phone and computer hacking, inappropriate commissioning of private investigators, payments to police and corruption.

Up to now, the police had requested it did not interview any individuals in order to avoid prejudicing its investigation.

Mockridge also disclosed that the company has nearly completed a "reconstruction and collating of a database of historic emails and other documents consisting of about 10 terabytes worth of data".