Bill Etheridge says he wants to see 'a return to the days' when prison focused first and foremost on punishment, and vowed to 'rehabilitate without using significant financial resources'.
His measures include:
removing all luxuries from jails, including all electronic devices.
an automatic 10-year sentence increase for prisoners who attack prison officers.
locking prisoners in their cells for the first six months of sentences.
banning all visits over the same period.
a £40,000 annual charge on prisoners to be levied until 'their assets are depleted'.
It comes after Mr Etheridge called for a referendum over bringing back the death penalty, a measure which he says he is in favour of.
Mr Etheridge, who is also a Dudley councillor, said the measures would reduce re-offending and 'ensure people do not want to return to a hostile environment', as well as driving down the cost of prisons.
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"There should be no requirement to provide miscreants with the sort of electronic gadgetry that the poorest in our society struggle to acquire," added Mr Etheridge, who says he has never seen the inside of a prison.
"Prisons should be there to provide shelter, toilet provision, food and access to reading materials for self-advancement.
"Anything more than these basic essentials is an unnecessary waste of tax payers money.
"We must drive down the cost of prisons and ensure that they are places that no one would wish to return to."
The prison population in the UK is around 80,000, with the cost of imprisoning someone in excess of £40,000 a year.
West Midlands Police and Crime Commissioner David Jamieson, said: "I would be more than happy to take Bill on a tour of one of the region's prisons to inform him of how they actually operate.
"I'd also be happy to take him to meet some of the West Midlands employers who take on former offenders and turn them from tax burdens into tax contributors."
Mr Etheridge hopes his 'Billieve in Bill' campaign will see him succeed Mr Farage, who announced he was standing down as UKIP leader after the EU referendum.
His other key policy areas have included reintroducing smoking areas in pubs, reclaiming Britain's fisheries and a return to widespread coal mining.
In calling for a referendum on the death penalty, Mr Etheridge said 'the very worst crimes deserved the ultimate penalty'.
Meanwhile Mr Etheridge has joined forces with his ex-wife, Councillor Star Anderton, UKIP's disabilities spokeswoman, to push for more cash for carers.
Councillor Anderton's plans involve putting carers on the National Living Wage and giving them more support.
Mr Etheridge said: "The beauty of this is that although it looks like there is spending involved, there's actually a long term saving.
"Not only would we save money, but also free up space in the NHS and indeed the whole system. This is one of the rare occasions where spending money now would save in the long term.
"We hear other parties claiming they care when actually, they don't care a jot. This innovative policy shows that Ukip really does care."
Mr Etheridge is involved in a four way battle for the leadership of UKIP. Steven Woolfe is favourite to win the election, with Lisa Duffy and Jonathan Arnott other contenders.
The bookies rate Mr Etheridge a 20/1 shot. He entered the race earlier this month after his chosen candidate, deputy leader Paul Nuttall, decided not to stand.