The Press Complaints Commission was today criticised at the Leveson Inquiry for having taken a “somewhat restrictive and timorous” approach to investigate phone hacking.

Robert Jay QC told former PCC director Tim Toulmin that the self-regulation body had failed to “test the boundaries of its powers” by choosing not to question former News of the World editor Andy Coulson after he resigned from the tabloid following the 2007 convictions of Clive Goodman and Glenn Mulcaire over phone hacking. Toulmin rejected this suggestion.

Toulmin, who headed the PCC from 2004 to 2009, said the prospect had been discussed but it was decided that the body’s powers “wouldn’t have had traction” with Coulson.

He added that he later thought this was a mistake. “The PCC should have been seen to ask him,” he said. Lord Justice Leveson interjected, saying that doing so would have been “incredibly powerful”.

Quizzed about the PCC’s response to the Goodman and Mulcaire jailings, Toulmin said that although the PCC did not investigate the matter, it conducted an “exercise that was designed to produce a forward-looking report” and establish principles of internal governance to avoid future wrongdoing.

“We were looking at how it arose, and the culture,” he said.

The PCC produced two reports, one in May 2007 that found no further evidence of wrongdoing, and one in September 2009 that has since been withdrawn, which concluded the body was not misled by the News of the World.

Regarding the 2009 report, Toulmin conceded that dismissing evidence from the Guardian was a “major mistake”. He said he was not a member of the board that decided on the report’s conclusions.

Testifying at the Inquiry earlier this month, Guardian editor Alan Rusbridger had said the 2009 report was “worse than a whitewash”.

Elsewhere in his testimony, which ran for over three hours, Toulmin discussed the PCC’s response to the Information Commissioner’s findings on Operation Motorman, which examined the use of a private investigators by the media to obtain personal information. He said that the then commissioner, Richard Thomas, went to the wrong body when he approached the PCC with his report. “He either should have gone directly to the industry — trade bodies — or the code committee, which is more representative of the industry,” he said, noting that data protection breaches were outside of the PCC’s remit.

Last month, Thomas told the Inquiry the PCC “should have done more” in response to the Motorman findings, and that he sought their “loud, strident condemnation.”

Toulmin also asserted that the PCC was not subject to influence from current editors serving on its board, namely Daily Mail editor Paul Dacre and former News International CEO Les Hinton. “They never a single time would phone me up and suggest we should behave in a certain way,” Toulmin said.

Toulmin argued that PCC members were not “cowed” by editors’ presence, and that their presence gave”bite” to complaints rulings.

In his witness statement, Toulmin argued that it was “inappropriate” to call the PCC a regulator.

Leveson also put it to Toulmin that the PCC was believed by the public to be a regulator ” when it wasn’t actually a regulator at all,” Leveson said. Toulmin agreed, claiming that it was “a complaints handler (…) a sort of ombudsman.”

The PCC’s current director, Stephen Abell, who gave evidence this afternoon, said he too was “happy” that the term regulator not be used to describe the PCC. He said that at the heart of the newspaper industry is “people exercising their right to be polemic”, and that regard needed to given to the nature of the industry when coming up with an over-arching structure.

During his testimony he ran through cases of complaints made to the PCC, citing Jan Moir’s column in the Daily Mail about the death of singer Stephen Gately, which was originally headlined “Why there was nothing ‘natural’ about Stephen Gately’s death”. Abell said there were over 22,000 complaints about the piece — which was later amended to the print edition headline “A strange, lonely and troubling death” — but it was “just short” of a breach of the PCC code, despite being a “difficult” episode to judge.

The Inquiry continues tomorrow, with evidence from current PCC chairman Lord Hunt, former chair Sir Christopher Meyer and PCC member Lord Grade.

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