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Last Updated: Tuesday, 4 April 2006, 23:25 GMT 00:25 UK
Blair and Cameron agree on funds
Tony Blair and David Cameron
Mr Blair and Mr Cameron met on Tuesday night
Prime Minister Tony Blair and Tory leader David Cameron say they agree the rules on political party funding must be reformed before the next election.

Following talks on Tuesday night at Westminster, Mr Blair and Mr Cameron agreed to continue negotiations and open up talks to other parties.

The talks came in the wake of the "loans for lordships" row which has involved both the Tories and Labour.

Mr Blair, Mr Cameron and the Lib Dems all say they will declare future loans.

'Constructive discussion'

Former Whitehall chief Sir Hayden Phillips has been appointed to liaise between parties with ideas for reform - which include possible state funding for political parties.

Labour Party chairman Ian McCartney said it had been a "constructive initial discussion" which would be continued in further meetings.

"We had broad agreement on the main questions the parties need to address as part of the Phillips review," he said.

"There was agreement between both parties at the meeting that we should move forward to ensure that any new legislation is in operation before the next general election."

David Cameron
Mr Cameron has called for a cap on party donations in future

Commenting on the funding controversy, the Tory leader said: "I am the only leader of a major political party that has actually come up with sensible proposals for reforming political party finance in this country and for cleaning it up - and I am putting this to the prime minister today."

Before the meeting, Mr Cameron said he would be outlining his plans to Mr Blair for a cap on donations, tax relief for small donations to encourage new membership and "modest" state funding.

A Conservative spokesman said the party's proposals had been met "with interest" by Labour.

Mr McCartney said there needed to be "proper debate" within the Labour Party before any submissions were made to Sir Hayden.

'Cash for peerages'

At present anyone donating more than 5,000 has to be named - but people lending money do not have to be.

The fact people had lent millions of pounds to Labour and the Tories in 2005 emerged only after claims, which have been denied, of "cash for peerages".

Labour has since named 12 businessmen who loaned the party almost 14m in the run-up to the general election.

The Tories named 13 backers who lent them 16m, and say they will show the Electoral Commission a list of names of other people who lent money.

The meeting comes as the police continue investigating "cash for peerages" allegations.

It also follows an Electoral Commission request to the treasurers of the main parties urging them to declare all loans which "are not on commercial terms", including those which "may be converted into a donation at a later stage".

Ballot box
The Labour Party wants "proper debate" over the issues

Labour named 12 backers - including property developer Sir David Garrard (2.3m) and Science Minister Lord Sainsbury (2m).

The Conservatives owe 37m in total, having borrowed 16m from a bank to buy the freehold on its former headquarters in London's Smith Square and 4.7m from local associations.

Liberal Democrat leader Sir Menzies Campbell pressed Mr Blair and Mr Cameron to say why they funded their election campaigns with "large scale concealed loans" and at what benefit to the lenders.

The UK Independence Party (UKIP) said it feared a "stitch-up" of smaller parties, particularly if Mr Blair and Mr Cameron extend the existing formula, which restricts state funding to parties with two or more MPs.

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