MENZIES CAMPBELL is set to become the first Liberal Democrat leader to receive a salary from the public purse after his party struck a secret deal to receive extra state funding.

The Lib Dems are understood to have persuaded Sir Hayden Phillips, appointed by Tony Blair to recommend changes to the funding of political parties, that they should be awarded extra public money.

In a highly confidential deal, Phillips is said to have agreed to recommend that the party receive extra “Short money” to help it to carry out parliamentary business and to pay for the running of its leader’s office.

The Lib Dems hope the deal will almost double their public funding, with an extra £1.5m, and enhance their status as an opposition party.

They say Campbell, who at present receives only a backbencher’s salary, will benefit, receiving an extra salary in recognition of his heavy duties as leader of the third largest party at Westminster.

David Cameron, the Tory leader, receives a £70,035 annual salary on top of his £60,277 annual parliamentary pay, from public funds.

If Phillips’s recommendations are endorsed by parliament, Campbell could receive a similar sum, more than doubling his annual pay.

The secret agreement has angered the Tories, who claim that only the official opposition should be entitled to significant sums from the public purse.

A Conservative source said: “Phillips has accepted what the Lib Dems want, but we are not happy about it. Our view is that essentially Britain has a two-party system and we are the official opposition. But there is nothing extra on the table for the Conservatives.”

The Short money system, named after Edward Short, the MP who proposed it, was introduced in 1975 to support opposition parties. It is available to all opposition parties in the House of Commons that secure a minimum of either two seats, or one seat and more than 150,000 votes at the previous general election. The sum goes up for each additional seat gained.

The Tories receive £4.3m a year, £600,000 of which is for the running of the offices of the leader of the opposition. The Lib Dems receive £1.6m, but nothing for their leader’s offices.

Although the figures are still under negotiation, the Lib Dems argue that Short money of £3m, of which £400,000 would be designated for the leader’s office, would be a fair amount relative to the Tories’ allowance.

Campbell’s supporters say his workload far exceeds that of a backbencher, often requiring him to work an 80-hour week.

In the year 2006-07, the Scottish Nationalist party will receive £133,000 Short money, with £62,000 allocated to Plaid Cymru, £150,000 to the Democratic Unionists and £56,000 to the Social Democratic and Labour party.

The proposed deal, which will have to be endorsed by parliament, is fuelling bitterness between all the main parties. Insiders say Phillips is becoming increasingly frustrated by the failure to secure cross-party consensus on the size of donations to be allowed from individuals.

The main area of deadlock is to do with Labour’s heavy dependence on the financial support of the trade unions, which the Tories oppose. The Conservatives want a £50,000 cap on individual donations, while Labour argues that severing its historical link with the unions would be unfair and destroy its finances. It argues that large trade union donations are drawn from small contributions by thousands of individual members, thus complying with the Tories’ proposed limit.

Neither side is prepared to back down, raising fears that Phillips’s recommendations will be seriously undermined.

The Lib Dems are now suggesting a compromise that they hope could lead to an agreement. Chris Huhne, a Lib Dem frontbencher, said: “Donations from trade unions or companies ought to be split according to the votes of the trade union members or shareholders, rather than being given as a block as currently. Block funding is no more defensible than block voting.”

Phillips’s inquiry was prompted by the row over secret loans to Labour and the Conservatives. Last week it emerged that an e-mail revealing the existence of loans to the Labour party was sent to some of Blair’s closest advisers during the last general election campaign.

The e-mail from Matt Carter, then Labour party general secretary and registered treasurer, was reportedly sent to senior figures at No 10 and Spencer Livermore, one of Gordon Brown’s most trusted advisers. The chancellor has always insisted that he knew nothing of the loans.

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