Robin Oakley: "Curbing public cynicism may take time"

He confirmed all donations of more than £5,000 at national level and £1,000 at local level would also have to be made public in future.

The home secretary set out the measures in a Commons statement presenting the draft bill the government has drawn up on political donations.

Ashcroft: Likely to be unaffected by ban

It comes amid the on-going controversy over the business dealings of Conservative treasurer Michael Ashcroft, who is the largest donor to the party.

But it will not affect the billionaire businessman as he is still a registered UK voter, despite being a tax exile and holding joint nationality.

Home Secretary, Jack Staw: "All foreign donations should be banned"

Mr Straw told MPs the government was further proposing shareholder approval for company donations.

National spending limits for elections and referendum campaigns would also be introduced.

In the 12 months before the 1997 general election, the Conservatives spent about £20m, while Labour splashed out £14m.

Under the proposed rules, a party fielding candidates in all 659 parliamentary seats in the UK would be allowed to spend up to £19.77m.

An independent electoral commission

For referendums, each designated organisation or political party with more than two MPs would be allowed to spend up to £5m.

The new rules would instruct the government to remain neutral in referendum campaigns - but only in the month immediately before the vote.

"There is a point where the government should step back and leave it to the political parties and other campaign groups to make their case to the electorate," Mr Straw said.

An independent electoral commission would be set up to ensure the rules were stuck to and to educate voters and encourage people to turn out in elections, he said.

The commission would make public the names of donors, although the parties would be obliged to pass the information on to it.

No rules on 'cash for policies'

The draft bill is the government's first response to last year's report by the Committee on Standards in Public Life on party funding.

Mr Straw said the measures would restore the public's faith in democracy and their political representatives.

Shadow Home Secretary, Ann Widdecombe: "Donations should be without strings"

But Shadow Home Secretary Ann Widdecombe said the draft bill contained "glaring omissions".

In particular, she said, it failed to ban the use of blind trust, which were used by many senior ministers including Tony Blair.

She also said the changes would not stop "cash for policies" - a reference to donations by Formula One boss Bernie Ecclestone and groups opposed to fox-hunting to the Labour Party.

'Cleaning up politics'

The bill follows from Labour's 1997 general election manifesto which promised that the party would "clean up politics, decentralise political power throughout the UK and put the funding of political parties on a proper and accountable basis".

Labour has rejected claims that the bill and its timing are part of a vendetta against Mr Ashcroft.

Mr Straw has insisted that the new rules are "not directed at individuals".

But government backbenchers are already seeking changes to the bill, arguing it does not go far enough.