Big money still corrupts parties, watchdog warns

British politics will remain tainted by corruption because the three main parties are refusing to reform the way they are funded, the head of Westminster's anti-sleaze watchdog has warned.

"The system virtually requires [party officials] responsible for funding to offer access to all kinds of things which, even if not corrupt in practice, have the appearance of corruption," Sir Christopher Kelly said. "It adds to the tarnished nature of the political brand."

He issued a final appeal to David Cameron, Ed Miliband and Nick Clegg to agree a £10,000 cap on individual donations to their parties to ensure donors cannot buy access to or influence politicians. He warned that another funding scandal is inevitable if no ceiling is imposed. He also called for an inquiry by his body into the work of lobbying companies and into the private firms which run public services.

The chairman of the Committee on Standards in Public Life, pictured, criticised the three main parties for not acting on its recommendations to clean up party funding. It proposed they be recompensed for a donations cap with £23m a year of taxpayers' money.

Cross-party talks on the report are deadlocked. Although Mr Clegg tried to broker a deal, the Conservatives want a £50,000 cap and Labour opposes the committee's call for trade unionists to opt in to paying the political levy to Labour, rather than opting out as at present.

Sir Christopher predicted a repeat of the "cash for access" affair which forced the resignation of Peter Cruddas, the Conservative Party co-treasurer, after he was filmed offering meetings with David Cameron in return for donations of up to £250,000.

"Every time there is a story about confidence and trust, the reputation of political parties goes down another notch," he said. "It affects everyone. It damages the brand of all of them."

Sir Christopher warned: "The three main political parties committed themselves to doing something about it in their manifestos. And yet nothing is happening. But if they are going to reclaim any public trust, then they have got to be proactive in dealing with difficult issues like this.

"For the Labour Party, it involves addressing difficult issues about its dependence on the unions. For the Conservative Party, it requires giving up the advantage it possesses because it has a greater number of wealthier donors," he added.

Labour fears that there could be a secret deal in which the Tories support state funding for parties and the Liberal Democrats approve parliamentary boundary changes which could hand the Tories an extra 20 seats.