The Ashcroft affair shows that relying on the rich is bad for politics

At some point Mr Hague will see fit to part quietly with this colourful but embarrassing figure

IT IS hard to see how Michael Ashcroft can continue for much longer as the Treasurer of the Tory Party. Perception in modern politics counts for much, if not all.

Mr Ashcroft may turn out to have been a man of sharp business acumen but untainted integrity. He may have fallen victim, as he exotically claimed at the weekend, to public school snobbishness in the Foreign Office mandarinate. There may be nothing wrong with the main opposition party being so dependent on a man who, to put it politely, does not exactly maximise his UK tax burden. It may even be that the Government itself has not behaved too fastidiously in releasing information about Mr Ashcroft's dealings with its predecessor administration. But the problem is getting in Mr Hague's way.

So far, Mr Hague has been unable to bring himself to allow Mr Ashcroft's suitability for high office in the Conservative Party to be examined by the internal ethics committee which, for the most admirable of reasons, Mr Hague established after taking office. The argument has been that the allegations against Mr Ashcroft have not been sufficiently substantiated.

According to those in the Hague circle, the mood, if anything, has hardened in favour of Mr Ashcroft's remaining in office. We have heard that before. The best bet is still, surely, that if the party is not going to carry out its own investigation, Mr Hague will see fit at some point in the coming months to part quietly with this colourful, but now plainly embarrassing, figure. The more he clings to him, the more he is hampered from the business of opposition - and not only when it comes to challenging some of the governing party's own sources of funding.

But the Ashcroft case, for all it has hobbled the Opposition in the past fortnight, is not joy unconfined for the Labour Party. For a start, it keeps the focus on the issue of party political funding. And, unfortunately for the Labour Party, that issue is almost always more interesting as it affects the party of government.

Next week the Home Office will unveil its legislation in the aftermath of Lord Neill's report on party political funding. The assumption is that, beside the establishment of a long-overdue electoral commission, the bill will provide for a pounds 20m cap on general election campaign expenditure by each party. That Lord Neill reported at all, of course, is wholly to the credit of the Labour Government, given that the previous Tory one indefensibly refused to allow an enquiry into funding at all.

The new regime envisaged in the planned legislation cannot fail to be substantially better than anything that has gone before. But, in the longer run, it is unlikely to be enough.

The magic word, the incantation used to ward off all the demons which even a reformed system of party funding will struggle to keep at bay, is transparency. If the names of all those who give more than pounds 50 are made public, as Neill suggests, then what possible harm could accrue? And, of course, transparency, which the Tory party has over the years made a fetish of resisting, is a huge improvement on secrecy. It does at least allow journalism, albeit with some difficulty, to expose large donors to the kind of scrutiny of which the political process seems incapable. But the transparency is only partial.

I may know, for example, that Businessman X has given money to the Labour Party. But how do I know for certain whether his donation has affected policy? Donor influence takes many forms. Precisely what has come to light has been the extent to which the affairs of Mr Ashcroft, Belize businessman and British party donor, became inextricably intertwined with the Government of the day, which was wasting valuable time, not to mention taxpayers' money, on diplomatic initiatives on his behalf. Perhaps this had nothing to do with the fact that he had been a party donor since the early Eighties. Perhaps pigs can fly.

Ironically, the Neill proposals will not in fact make any difference to the case of Michael Ashcroft, since the ban on foreign donors will not cover those who are UK citizens, wherever they operate from and wherever they pay tax. But in any case the argument that a pounds 20m cap plus transparency plus some sensible lesser reforms, will once and for all kill off the row over how political parties are funded, is, I suspect, forlorn.

One of the most striking aspects of the Ashcroft affair has been the scale of his beneficence - pounds 3m in recent years. It is not unduly cynical to suspect that the more that is given, the more the beneficiary is vulnerable to influence, whether the donation is from Mr Ashcroft, or the animal rights lobby, or a supermarket boss. Yet the Neill committee in the end rejected a limit on individual donations. The idea that the electorate is better informed as a result of the extra money spent on election campaigns is simply not sustainable. But Lord Neill's committee also rejected the sensible proposal by the current chairman of the Home Affairs Select Committee, Chris Mullin, that the overall cap should be set at a much lower level of pounds 10m, to reduce the cost of fighting election campaigns.

The other course against which it set its face, apart from well-justified tax credits for donations up to pounds 500 to encourage smaller-scale party giving, was any large-scale extension of state funding. Indeed, state funding of political parties has suddenly become a highly unfashionable cause. Mr Blair, for commendably unstatist reasons, was highly sceptical about state funding before he became party leader, when it was unchallenged party policy. Moreover, quite a wide spectrum of opinion - embracing, for example, Mr Mullin - is now against it, not least because it is thought (and opinion poll evidence bears this out) that the electors draw the line at having their taxes used to fund politicians.

But for how long will this remain the case? There is a paradox here, which challenges the assumption that greater openness will resolve the issue. For the more, entirely desirable, transparency that surrounds individual donations, the more there will be unease about the possibility that named and identified donors are exercising undue influence on the parties they are supporting. The Tories should also consider the benefits of state funding. Why should a party which won as much as 30.8 per cent of the national vote have to be as embarrassingly dependent on the Michael Ashcrofts as the Tories are?

Sooner or later, public opinion may shift. Yesterday the Labour MP and funding expert Martin Linton called for a limit on individual donations, and predicted that in the end the public would "have to accept the argument for state funding".

He is surely right. There is a limit to how much external influence by party donors the electorate will, in the long run, be prepared to accept. Isn't this one of the reasons why Tony Blair won by such a handsome landslide on 11 May 1997?