Gordon Brown has changed his policy on party finance as a result of the David Abrahams donations row. Ten days ago the Government was committed solely to bringing forward proposals, not even early legislation, to limit spending, with other issues left for later discussion. But, now, ministers are exploring a comprehensive package, including curbs on donations and more public funding, based on the plan put forward by Sir Hayden Phillips before the all-party talks collapsed in October.

Mr Brown’s initiative was initially dismissed by the Tories as a way of distracting attention from the illegal use of proxies to channel funds to Labour. This is a breach of the 2000 Act on party finances, not requiring new legislation. But, coming on top of the cash-for-peerages affair, the donors row has undermined further confidence in the parties, and their dependence on wealthy individuals.

So the Government’s shift potentially offers the chance of putting party funding on a more acceptable basis, as David Cameron recognised yesterday in his cautiously positive response. It is only potentially a way forward because there are still stumbling blocks. There will be cross-party talks this month, but Mr Brown indicated that the Government would press ahead anyway (hoping for Liberal Democrat support): “We will not accept one party deadlock – a breakdown that serves only to block progress.”

The Phillips package – intended to restore public trust – involves a cap on donations of £50,000 a year, a global spending limit for the main parties of £150 million over the course of a full Parliament and limited public funding linked either to small donations or votes won.

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A central issue has been the treatment of the unions. They would be subject to the £50,000 cap for one-off donations, but not for the affiliation fees they pay to Labour. Under the Phillips plan, these would be treated as individual donations by union members provided the latter are told each year how much they are contributing, where it goes, and that they can opt out at any time. There would also have to be a one-for-one transparent link between what members pay into a union’s political fund as their contribution to the affiliation fee and what the union pays to a party. At present, some unions affiliate fewer members than pay the fee.

Mr Brown has been talking to union leaders. Most general secretaries would accept the Phillips package as preferable to more sweeping changes. For instance, some Tories have urged a return to opting into the political levy by union members, rather than the opt-out procedures that have applied for 60 years.

Mr Cameron has insisted that unions should not be exempt from the £50,000 cap and has made this a condition for accepting the limit and for discussing new state funding. This is not about being for or against state funding since the Tories already receive more than £5 million a year in Short and Cranborne money for work in parliament and in policy development grants. It is, as Mr Cameron recognises, about whether to extend such support. However, there is strong Tory pressure against accepting any extension. The conservativehome website received strong support yesterday in urging Mr Cameron to mount an antiEstablishment, anticorrupt politicians campaign.

Labour leaders are aware that now is hardly the time to ask taxpayers for more money for parties. And, on Saturday, Mr Brown emphasised that he needed to be “convinced that there would be public acceptance of extensions” (to public funding). Labour is obviously the political loser from the Abrahams affair, but all main parties, and representative democracy itself, will suffer unless a broadly acceptable system of financing politics is found.

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