The Liberal Democrats hold the key to the reform of party finance. They offer Gordon Brown the chance of going ahead with early legislation on a multiparty, if not all-party, basis, even if the Conservatives are not on board, as well as, crucially, the hope of a securing a majority in the Lords.

The Lib Dems have an even stronger interest than either the Tories or Labour in reduced limits on spending and would suffer less than the other two parties from a tigher cap on donations.

So the most significant comments yesterday were from David Heath, the Lib Dem justice spokesman and representative on the now-suspended talks chaired by Sir Hayden Phillips. These came two days after Gordon Brown had told the unions to make the political levy more transparent, as urged by Sir Hayden in his draft plan, now backed by Labour.

Mr Heath said it was good news if the Tories were “genuinely prepared to rejoin all-party talks, but only if they are prepared to take matters forward rather than returning to square one”. In parallel with Labour’s new approach, Mr Heath said he hoped that Mr Cameron had understood the Phillips proposals, “which for the first time would apply capping to trade union donations and genuine transparency to affiliation fee payments”.

Mr Cameron said the Phillips package did not go far enough in capping union donations: “Individuals have to have a real choice as to whether they pay the political levy and to which party they give the money.” This returns to the century-old opt-in/opt-out debate on the political levy, a red line for the unions and most Labour leaders. Mr Cameron opposes controls on spending between elections, as opposed to general elections, where he favours a cut in the campaign limit from £20 million to £15 million (saying that the Tories were budgeting for“ £10 million if there had been a November contest). He rejects a between-elections limit because opposition parties need to be able to address the advantages enjoyed by incumbent MPs and by government, while such a limit risks nationalising politics and driving out activists. The Phillips package sought to be flexible, with a £150 million limit for a whole Parliament and exemptions, including for constituency parties spending less than £40,000 a year.

The gap between the Tories and Labour looks too big, which is where Mr Heath’s positive response matters, but Mr Cameron said that if a £50,000 all-round cap on donations is agreed, and the cost of politics is cut by ending MPs’ communications allowance, it would be unrealistic to say no to additional state funding. Mr Brown confirmed that he was not proposing further public funding for parties at this stage. He knows that voters are hardly in the mood to give money to parties.

At stake are not just new funding controls but the underlying question of voters’ attitudes to parties. At present, there is a populist, and destructive, antipolitician mood around. But strong parties are vital to making representative democracy work. Any question of more taxpayer money should depend upon whether parties can gain broad support, and money, from voters.

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