Control over appointments to the House of Lords should be removed from political leaders in the wake of the cash-for-honours affair, MPs have said.
The future of the House of Lords is under review
Parties are not trusted to appoint new peers on merit and an independent body should have the final say, the public administration committee's report said.
MPs also recommended a system for peers to resign, or be compelled to leave, which they cannot do at present.
They criticised parties for trying to get around laws on transparent funding.
The MPs' investigation into alleged links between the honours system and financial support for parties was suspended during the police cash-for-honours inquiry.
Committee chairman Tony Wright said that the fact the police inquiry ended with no charges being brought "has not diminished the damage that has been done to trust in public life".
"We want to rule out even the possibility that individuals could buy a seat in our Parliament," he said.
Instead there should be explicit criteria for membership of the House of Lords and parties should submit a "long list" of nominations, with explanations of why they deserve a seat.
New peers could then be picked by a "clearly independent body" from the lists, the report said.
Currently the House of Lords Appointments Commission (Holac) has an advisory role and its decisions are, in theory, subject to a veto by the prime minister.
The prime minister also has a role in appointing members to the commission, which is sponsored and supported by the government.
The committee's report said a formula should be devised to draw up the size and party balance of seats in the Lords, based on the proportion of votes a party won at the last election.
It also wanted to break the link between honours and seats in the House of Lords, suggesting "some people might be tempted more by the title of Lord or Lady" than a desire to improve the law or scrutinise government business.
Currently peers cannot resign or be sacked - they can only take a voluntary leave of absence - and the committee said that should be changed.
And it criticised the Political Parties, Elections and Referendums Act 2000, for allowing a loophole in which commercial loans did not have to be declared - without defining what made a commercial loan.
But the report said: "Having designed the loophole, the parties did not have to dive through it so assiduously."
It said a "deliberate attempt" was made to stretch it "as far as it would go" adding: "Having agreed legislation to make party funding transparent, parties appear to have gone to some lengths to get around it."
The committee proposed several measures that would need a change in the law - such as a "long overdue" modern law on public sector corruption.
But they urged the prime minister to act immediately to ensure new peers are chosen by Holac, not parties.
Mr Wright said: "The fact is that people do not trust parties to appoint their own members to the Lords on merit, and do not believe there is no connection between donations that are made and peerages that are received.
"The final judgment of whether someone is suitable must be made by a body that is clearly independent of the government and of political parties."