Millionaires to face cap on donations to parties

Millionaire benefactors will face a cap on the amount they can donate to parties to stop individuals having an undue influence over party policy, Lord Falconer, the Lord Chancellor, signalled yesterday.

He also indicated to a committee of MPs yesterday that a big increase in state funding would be available to clean up political party funding. Lord Falconer's clear hint that the Government would support a cap on individual donations is the latest step to stem the row over secret loans to political parties.

David Cameron, the Tory leader, has suggested a cap of £50,000 on individual donors to political parties. All three main parties have relied on wealthy backers who in future could be banned from giving large sums. Tony Blair came in for heavy criticism after Labour disclosed that it took £13.9m from 12 lenders before the general election. The Prime Minister is facing a criminal investigation over claims that the money may have been linked to peerages for four of the lenders, whose names were blocked by a Lords appointments commission.

Lord Falconer said that as an emergency measure to restore damaged public confidence, the Government would be bringing forward changes to a Bill already going through Parliament to force the parties to disclose the names of all lenders in future.

"I think the point about state funding is that you have to ensure that political parties have sufficient funds to operate effectively and that the parties are not dependent on a few large donors," he told the Constitutional Affairs Committee, which is chaired by the Liberal Democrat MP Alan Beith.

"A significant increase in state funding would carry with it a cap on donors. A cap on donations is the best way of dealing with the issue of a few people getting undue influence on a party. That is one of the most important issues that has to be looked at."

The cap would ban any repetition of the £1m donation by the Formula 1 boss Bernie Ecclestone to Labour when motor-racing was lobbying hard to be excluded from a UK ban on cigarette advertising. That was repaid.

Labour's other big donors include the science minister Lord Sainsbury from the supermarket family who has given Labour a total £13.5m from his personal fortune and lent a further £2.3m; and four businessmen including the property developer Sir David Garrard, who donated £200,000 to the party and lent it £2.3m but also gave to the Tories.

Tory big donors have included Lord Ashcroft, the former treasurer of the party, who gave £3m. The Liberal Democrats took £2.4m from Michael Brown, who is based in Florida.

Sir Hayden Phillips, the former permanent secretary at the Constitutional Affairs Department under Lord Falconer, was appointed to find a cross-party consensus on reforms to party funding. He reports in December.