Could there be new limits on big donations?

Increasing state funding is one option being investigated by ex-civil servant Sir Hayden Phillips.

He said politicians' views might be at odds with public opinion and launched a website asking for people's views.

New Commons leader Jack Straw says he wants to broker an all-party consensus on the issue before the next election.

Tax relief calls

Sir Hayden was asked to review the funding system amid claims - rejected - that wealthy businessmen were offered peerages in return for loans to political parties.

His report, due by the end of the year, will examine calls for the current �20m limit on the amount each party can spend at elections to be reduced.

Increased state funding and new curbs on spending between elections and big donations are other options being considered.

I need the public's input into this review Sir Hayden Phillips Former civil servant Watchdog 'in the dark' on loans

There are also calls for tax relief on donations to encourage smaller gifts and to cut reliance on major donors who can be accused of trying to buy influence.

Sir Alistair Graham, chairman of the committee for standards in public life, has argued there needs to be informed public debate on the issue and not a behind-the-scenes deal.

Launching his inquiry, Sir Hayden said he wanted to hear from the public.

"The point of having a website is to hear the public's views, in addition to the views of the political parties," he said.

"It would be extremely useful for me to hear from as many people as possible. I need the public's input into this review."

'Avoiding loopholes'

Sir Hayden said financially healthy political parties were fundamental to British democracy and funding should be transparent.

Any future system should be as fair as possible between the parties and encourage people to get involved in democracy, he argued.

Mr Straw said he had always been fascinated by parliament

MPs on the Commons constitutional affairs committee are also examining the issue and are currently questioning Sir Hayden.

He told them he had not made up his mind what he would do if the political parties' views were in conflict with public opinion.

Sir Hayden said he wanted to produce a system which lasted rather than loopholes appearing within a few years which people could find a way through.

'Celebrate donations'

The Electoral Commission is starting its own inquiry on how the openness and regulations over party funding.

Commission chairman Sam Younger told MPs there would be new opinion polls to gauge the public's views.

Mr Straw told BBC Radio 4's Today programme trust in the funding arrangements had to be improved.

"What we have to get across is that funding political parties, making donations to political parties, is something which is not only respectable but ought to be celebrated not in order that it purchases any influence but that it is a selfless contribution to the functioning of our democracy," he said.

The Conservatives say the trade unions should be included if there are new limits on donations.

Mr Straw said he did not think "for a second" that trade unions should be banned from giving money to political causes but there were questions about how it was regulated.

He stressed that unions already had to ballot their members regularly on whether they wanted to support the Labour Party.