The Power Inquiry’s investigation into the disengagement of voters has concluded that politics must become cleaner and fairer.

Its recommendations include allowing people to vote at 16, a cap of £10,000 on donations to political parties, lifting the requirement for a £500 deposit to stand as a parliamentary candidate, and enabling voters to give £3 each from public funds to a political party as they cast their vote on polling day.

The 18-month inquiry, headed by Baroness Kennedy of the Shaws and funded by the Joseph Rowntree Trust, also calls for politicians to hand over more power to voters. It proposes that members of the public should be able to propose legislation and, if they can get two million signatures on a petition, compel the Government to hold a referendum.

Both main political parties are understood to be sympathetic to the inquiry’s findings and the Chancellor has agreed to speak at a conference on the findings next month.

Several of the changes, such as encouraging communities to be more active in local decision-making and greater local autonomy over spending, are likely to be at the core of Mr Brown’s reform agenda and, should he become Labour leader, would feature in the election manifesto.

Mr Brown believes that such a radical programme could become a “dividing line” with the Conservatives. One of the Chancellor’s aides said the inquiry showed that people wanted a greater say in politics. “We must put this agenda at the heart of our plans for the next Parliament.”

Baroness Kennedy said that politicians have become complacent about the scale of voter disengagement.

“This is a crisis far greater than the one they think they’re dealing with,” she said. “It was the abstention party that won the last election — several million more people didn’t vote than voted for the Government.”

She said of voters: “They do care about the bread-and- butter issues that affect their lives; they do care about their communities and neighbourhoods, their country and the world, but they are totally alienated from the political system.”

The inquiry found that the current system of funding political parties, with most dependent on rich donors, was perceived by voters to be open to abuse.

As well as the recommendations to cap individual donations, the report also says that large organisations, such as trade unions, should be able to give only £100 per member.

It concluded that voters were fascinated, rather than apathetic, about politics but felt alienated by the party system. Baroness Kennedy said: “Ordinary people feel they are not being listened to. They think the parties are all the same.

We’ve got a vanilla-flavoured politics.”

• There was surprise yesterday after Lord Falconer of Thoroton, the Lord Chancellor, announced plans to push forward Lords reform by seeking a crossparty “consensus”, amid reports that Mr Blair might back a compromise. One government source said that this had not been agreed by the Cabinet.

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