Labour anger over funding plans

All the parties say they want more transparency in funding

There has been an angry response from Labour MPs to the suggestion that there might be a £50,000 limit on political donations, including from trade unions.

Sir Hayden Phillips, who is reviewing political funding, has suggested such a cap be phased in over four years.

Labour MP John McDonnell said this would break the "historic link" with unions, and suggested this was Tony Blair's "hidden agenda".

An emergency meeting of Labour's ruling body has been called for Thursday.

I see no reason why donations from trade unions should be exempt from the cap Sir Hayden Phillips

There has been no official word from Downing Street on whether Mr Blair supports a cap on donations.

But Mr McDonnell, a left-wing Labour MP who has said he will stand against Gordon Brown to replace Mr Blair when he steps down, said "it looks as though the prime minister is backing these proposals".

Sir Hayden was asked by Tony Blair to examine whether agreement could be reached over changes to party funding following the emergence of the "cash for honours" allegations.

Those allegations, which are denied by all concerned, are that honours have been given to people in return for people donating, or lending, money to political parties.

Difficulties

In a memorandum setting out his current thinking, Sir Hayden writes: "I am conscious that the introduction of a cap on organisational donations will be difficult for the parties and so I propose that it starts at £500,000 falling to £50,000 over four years."

He adds: "I see no reason why donations from trade unions should be exempt from the cap."

At the moment 3.5 million trade union members pay a £3 annual levy, which its leaders can then use to help fund the Labour Party.

Sir Hayden is understood to be suggesting that each union member be registered as an individual donor to the Labour Party.

This would mean Labour would have to write to each of them each year to ask if they wanted to remain a donor and could reduce the influence of union leaders on party policy.

Postponed

Labour housing minister Yvette Cooper told the BBC's Daily Politics the union link was part of the historic tradition of the Labour Party.

She said: "So I think there would be strong hostility in the Labour Party towards a funding report that paid no attention to the nature of the party."

Sir Hayden has also suggested a cap on spending between elections, rather than just the election campaign caps as now, and a ban on anonymous bodies donating funds.

These caps would hit all the main parties, which would no longer be able to get multi-million donations from individual supporters.

Sir Hayden's initial interim report, published in October, set out four scenarios for the future of public funding: minimal change, increased transparency, a cap on donations and greater levels of state funding.

At that stage he did not recommend any of the options.

All the main parties say they want the process of funding to be more transparent, to help increase public trust in politics.

Sir Hayden had been due to publish his final report this month, but it is thought to have been postponed to next year.