Jack Straw, the Justice Secretary, was accused of an "atrocious abuse of power" after he announced tough curbs on election spending, which could be designed to stop millions of pounds being poured into Tory target seats.
He also announced much tighter scrutiny of expenditure by parliamentary candidates to stop them getting round the new rules.
Conservative sources claimed the effect would be to scupper their campaign to build support in marginal constituencies that hold the key to election victory.
Labour MPs have become increasingly concerned that the Tory peer Lord Ashcroft has been using his fortune to provide substantial cash support to candidates in Conservatives' target seats. In more than 100 seats, candidates can apply for tens of thousands of pounds to support their local campaigns under the key seats initiative managed by the Conservative deputy chairman and multimillionaire Tory donor. Some candidates are believed to have already received over £50,000.
Until 1997 there were strict limits on the amount that candidates can spend in constituencies once they have been selected. Since then the limits have only applied once the election was called, allowing candidates to spend large amounts in the preceding months and years.
Mr Straw proposed a system which could limit spending by a candidate to £12,000. The rules could be in force by October and will be policed by the Electoral Commission, which will be given extra powers.
Francis Maude, the shadow Minister for the Cabinet Office, said: "This change could make it more difficult for candidates to campaign effectively and thus benefit sitting Labour MPs. This is an atrocious abuse of power."
Labour denied the moves were deliberately targeted at Lord Ashcroft, arguing they could affect Labour candidates being financially supported by the unions.