LONDON (Reuters) - A far-reaching inquiry into British newspapers called for a new independent body to regulate the press, backed by law, to prevent a repeat of the excesses which led to a phone hacking scandal at Rupert Murdoch's News of the World tabloid.

Senior judge Brian Leveson said the recommendations would in no way allow parliament to regulate the newspapers, but his proposals will put Prime Minister David Cameron on a collision course with an already hostile press and senior members of his government if he accepts the findings.

The inquiry was ordered by Cameron following public outrage at Murdoch's now defunct tabloid whose staff routinely hacked into phones, including that of schoolgirl Milly Dowler who was later found dead.

Leveson was highly critical of sections of the press, describing its behavior as "outrageous" and said it had "wreaked havoc with the lives of innocent people".

He said the newspapers should be subject to a new law which would set out the principles for an independent self-regulatory body to stick to, that would also place a legal duty on the government to protect the freedom of the press.

The independent body could be scrutinized by Ofcom, the regulator which already oversees radio and television.

Anything less, Leveson said, would not be accepted by the victims of press abuse, a key element for Cameron.

"Despite what will be said about these recommendations by those who oppose them, this is not, and cannot be characterized as, statutory regulation of the press," he said in the almost 2,000 page report.

Leveson also said that politicians had become too close to newspaper executives in the last 30 years, and warned that the close ties formed between the government and Murdoch's News Corp over the aborted takeover of BSkyB was concerning and had had the potential to jeopardize the $12 billion bid.

He said there was no credible evidence of bias on the part of senior minister Jeremy Hunt in his handling of the BSkyB takeover, but said the close ties allowed a perception of favoritism.

(Reporting by Kate Holton and Michael Holden)