Liberal Democrat leader Nick Clegg is calling for the number of MPs in the House of Commons to be cut by 150.
Nick Clegg addresses a packed House of Commons
This would save taxpayers millions of pounds and cut political parties' need to raise cash from big donors, he says.
He told the BBC: "If we want to restore trust in politics we have got to get the money out of party funding."
Senior Tory MP Francis Maude said the Conservatives had also called for a cut in the price of politics and reliance on big donors.
Mr Clegg told the BBC Labour and the Conservatives depended on "big money" from unions and individuals, but admitted the Lib Dems had also had problems with funding.
He told BBC Radio 4's PM programme cutting the number of MPs by "at least a quarter" would save about £30m a year.
The MPs to lose their seats would be identified though a Boundary Commission review of Parliamentary Constituencies, as part of wider electoral reform.
Instead he said more power should be devolved.
"We've got this bizarre electoral system where only about 8,000 voters in 80 seats decide the final outcome of an election so you need to make that fairer and more representative.
"But also if we do fewer things in London at the centre, we're a very over-centralised country ... then of course you would need fewer politicians or indeed civil servants in London."
He also said he wanted the government's £200m "advertising budget" to be substantially cut back.
The savings would mean that more state funding would not mean any additional costs to the taxpayer, he said.
Cap on donations
Instead he proposes people be asked, when voting at elections, if they want the state to make a £3 donation to their chosen party.
"I'm not suggesting a blank cheque from taxpayers - far from it. What I'm saying is, if the taxpayer is going to put any money into parties that should be at the explicit consent or on the instruction of voters themselves - at the ballot box. And there should be significant cuts in the cost of government and politics."
He also said trade unions should allow members to donate, through their political funds, to a party of their choice.
Mr Clegg is also calling for a £25,000 cap on individual donations to political parties and a £10m limit on annual spending by political parties.
Cross-party talks on funding political parties effectively broke down after 18 months last October, when Labour and the Conservatives were unable to agree on setting limits on campaign spending and donations.
Shadow Minister for the Cabinet Office Francis Maude said: "We welcome the Liberal Democrat backing for Conservative calls to cut the cost of politics and reduce the reliance of political parties on big donors.
"I hope there is now scope for political consensus on the need for a cap on donations, as part of a comprehensive package of changes to clean up politics."
He accused the Labour Party of being "the roadblock to reform" by refusing to accept a cap on trade union affiliation fees.
In December, Prime Minister Gordon Brown said he wanted to move quickly to reform party funding and wanted to make the political levy paid by trade unions "transparent".