Norman Fowler: Is it time for state funding of parties?

Leading the Opposition charge, Margaret Beckett accused John Major's Conservative government of selling "honours given in the name of the Crown" and made the brave claim that the Labour Party revealed "from where we obtain almost every single penny that we receive".

The culmination of the debate came when a Labour MP quite wrongly accused the Conservative Party of receiving money from the Saudi Arabian government. Weeks later the charge was withdrawn, but not before the damage had been done.

Party funding raises fundamental issues which go beyond party politics to the heart of democracy. In 1993 my case was that it would be strange in a free society to ban people's right to give to whatever cause they wanted. With the benefit of what I have seen since I would change that evidence.

I think that there is everything to be said for voluntary contributions at the local level. But I would limit what any one contributor could give to £5,000. Fundraising at the national level poses bigger issues.

Contributions can go into hundreds of thousands of pounds, even millions. I accept that some contributors want nothing in return. Others certainly expect a return for their investment. It may be an honour or it may be influence on policy.

So the questions are these. Can it be right that a contribution to a political party can earn you the right to be part of the parliamentary process and vote on measures that have been passed by an elected Commons?

Or can it be right that a contribution given by an individual or an organisation such determine actual policy? Sadly that is a feature of American politics, but it makes it no easier to defend.

State funding has worked well and virtually without complaint in assisting opposition parties to carry out their parliamentary business at Westminster. Is it such a giant step to extend that approach to funding the parties' central spending?

No longer would they need to depend on one or two big contributors. That might even make parties more cautious.

Patricia Hewitt seemed to suggest yesterday that an elected House of Lords would solve the problem. It would not. For it leaves the other half of the problem - contributions for influence - untouched. We need complete reform.

Lord Fowler was chairman of the Conservative Party 1992-1994