Tony Blair says he wants a new approach to party funding following a row about secret loans to the Labour party.
Political funding can be a murky business
At the moment UK parties have to declare any donations over £5,000 but there is no upper limit on contributions - and loans are not covered by the rules.
Some - including health secretary Patricia Hewitt - believe state funding is the only way to prevent future controversies.
Others argue there should be a cap on political donations - or even tighter restrictions on how much parties can spend at election time.
The Conservatives suggest loans should be paid back within three months.
Downing Street has appointed former top civil servant Hayden Phillips to lead cross party talks on the issue.
But how are political parties funded in other countries?
Some countries have attempted to address public unease about large political donations by imposing statutory limits on corporate, trade union or individual donations.
In France a ban on contributions from corporations and trade unions has been in effect since 1995, according to a report by the Electoral Commission.
Individuals can donate up to 4,600 euros (£3,000) per year to
candidates, which are tax deductible.
In 2002 state funding amounted to approximately 80m euros (£55.5m).
In the Republic of Ireland donations to parties are capped at a maximum of 6,348 euros - approximately £4,000 - from any one donor in any given year.
Other European countries to limit donations or ban certain categories of funding include Belgium, Germany, Greece, Italy, Poland, Portugal and Spain.
In Germany in 2003 state funding of parties amounted to approximately 300m euros (£208m).
In Japan the maximum amount any company or trade union can contribute to a political party in a year is 100m yen or £505,000.
Individuals are permitted to donate up to 20m yen (£101,000) per year.
A new law in Canada limits individual donations to each registered political party to Can $5,000 (£2,200) per year.
The law also bans donations from corporations and trade unions to political parties, and restricts contributions to MPs' constituency associations to Can $1,000 (£435) per annum.
In Québec only "qualified electors" can make political donations. The total contribution allowed per elector to each of the parties, elected members and candidates during the same calendar year is Can$3,000 (£1,300).
In the United States, amendments to the Federal Election Campaign Act in 1974 placed a $1,000 (£550) cap on donations to candidates from individuals and a $5,000 (£2,800) cap on contributions from Political Action Committees.
The 2002 Bipartisan Campaign Finance Reform Act increased these "hard money" contributions from individuals to candidates to $2,000 (£1,100) per election and banned unlimited campaign contributions - known as "soft money" - to political parties.
The presidential nominees of each major party are eligible for a public grant of up to $20m towards campaigning costs.
The UK Electoral Commission has said it is not against a cap on donations or state funding in principle, but it believes such a move cannot be justified until there is cross party and public consensus on the issue.
"We believe any cap would have to be set at a level around £10,000 if it were to have any positive effect on public confidence in the political party process," it says in a report.
"Such a cap would have a very significant impact on the funding of parties, raise questions about the acceptability of compensating with public money, about the rights of people to spend their money how they choose, and about the independence of parties from the state."
The commission said it would rather "encourage further debate on this issue" than demand a cap at this stage - something which would hopefully happen under the Hayden Phillips review.
A spokeswoman said taxpayers had proved resistant to the idea of state funding in the past but there was now a "public confidence issue".
"Even if there is just a perception donors are buying something there is a tension that needs to be resolved," she said.