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Financial Times editor Lionel Barber has told the Leveson Inquiry into press ethics his paper's code of conduct "is a model for self-regulation".

He said the code was stricter than the Press Complaints Commission's and there were severe penalties for breaching it.

Mr Barber called for a new independent press regulator, but said he would defend to his "last breath the freedom of the press".

He said the FT "should be the gold standard in journalism".

Mr Barber told the inquiry the FT's relationship with its readers was "one of trust".

"They need to be able to trust the information that we provide and that is why we have a very stiff code of conduct which goes beyond the PCC."

Employees who devalued the FT's reputation faced dismissal, he continued.

"I would argue that the Financial Times code of conduct is a model for self regulation," he said. "Because the penalties for not getting it right are severe."

Mr Barber said the PCC code was "pretty robust" but needed "to be enforced" and "credible".

'Last chance saloon'

Calling for a new regulation system, he said the closure of the News of the World had been a "wake up call" which made executives realise changes were needed.

He said all journalists should sign up to a "new body of independent regulation which is robust, credible and worthy of joining".

Mr Barber said it should not have any statutory form of compliance but should be "so good that everybody wants to be part of it".

It should have the power to impose fines for serious breaches of its code, force newspapers to publish admissions of errors prominently and have powers of investigation.

He said more outsiders should be brought into the PCC. "Journalists are not monks in cells, journalists are members of the community, journalists should be accountable in the court of public opinion."

"We are in the last chance saloon drinking our last pint," he said. "It is incumbent on the industry to produce new, credible proposals for independent regulation."

But Mr Barber warned other countries were moving towards curbing the freedom of the press and that "we should not go down that road".

"I strongly believe there is public interest in freedom of expression."

The FT used a minimum of two primary sources to stand up stories, as using a single source "you could potentially be manipulated," he said.

Chris Blackhurst, editor of the Independent, denied an accusation the paper had protected "one of your own" when journalist Johann Hari was accused of plagiarism..

Mr Hari was suspended by the newspaper after admitting lifting quotes from elsewhere without attributing the source of the material.

Mr Blackhurst said the paper had not known about the allegations.

"One of the problems was that no-one had ever complained, nobody had alerted us to the fact he had drawn his information from somewhere else. If there was we might have nipped it in the bud," he said.

Mr Hari will return in four weeks as a columnist, not an interviewer, after attending ethics courses in the US.

newspaper has reported Prime Minister David Cameron is expected to be asked to appear at the inquiry in future to answer questions about his relationship with News Corporation chairman Rupert Murdoch.

Mr Cameron's spokesman told reporters on Tuesday: "We haven't received any request but, when the prime minister announced that we were setting up the inquiry, he made very clear that it would have the ability to call politicians, including serving politicians and previous prime ministers. Obviously, if he was asked to attend, he would."

The Times said Labour Leader Ed Miliband and former Prime Minister Gordon Brown were also expected to appear at the inquiry.