LONDON (Reuters) - The British government on Tuesday rejected press regulation plans put forward by the newspaper industry and instead opted to pursue a proposal championed by Prime Minister David Cameron to rein in the heavily-criticised national media.

Parliament is seeking a way to stamp out the scandal-hungry culture in some of Britain's press that has caused public outrage and prompted a lengthy government inquiry in 2011 during which one of Rupert Murdoch's newspapers was found to have hacked into a murdered schoolgirl's mobile phone.

A panel of MPs weighed up a plan agreed by the main political parties as well as a rival proposal from the newspaper industry, both of which aimed to implement the recommendations of a public inquiry led by Brian Leveson, a judge.

"Whilst there are areas where it is acceptable, it is unable to comply with some fundamental Leveson principles and government policy, such as independence and access to arbitration," Culture Secretary Maria Miller said of the newspapers' plan.

The two plans both involve creating a new regulator and arbitration facilities to handle complaints but the newspaper plan is seen as giving more power to the industry and having greater safeguards against political interference.

Miller said the alternative cross-party plan would now be improved before being reviewed on October 30.

The Newspaper Society, a body which represents national and local titles, had previously argued that the government's plans could imperil press freedom.

The British newspaper arm of Murdoch's News Corp., Associated Newspapers which publishes the Daily Mail, and Trinity Mirror, were among the publishers to back the industry system.

(Reporting by William James; Editing by Mark Heinrich)

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