David Cameron branded political funding a "mess" as he opened talks with Tony Blair aimed at reforming the way parties are financed in the wake of the "loans for peerages" affair.
The Tory leader insisted that politics was not corrupt, but said the system was in need of reform.
During a meeting with Mr Blair at the House of Commons last night Mr Cameron outlined his plans to cap donations at £50,000, introduce tax relief for political gifts and sanction a "modest" increase in state funding for parties.
The parties are at loggerheads over proposals for a cap on funding, which could sever the traditional link between Labour and the trade unions, which provide the party with millions of pounds each year.
Earlier, Mr Cameron said: "I'm the only leader of a major political party who has actually come up with sensible proposals for reforming political party finance in this country and for cleaning it up and I'm putting this to the Prime Minister today.
"We have a relatively uncorrupt party system but we do have a party funding system that's a mess."
Mr Cameron added: "I think it's the right way forward to get rid of the impression that somehow rich people or big organisations or trade unions can buy influence or even get a seat in the legislature."
The party is hosting a series of public meetings, chaired by the former chancellor Kenneth Clarke, to debate public trust in politics. Mr Clarke said: "David Cameron is meeting with the Prime Minister to discuss party funding, but meetings in Westminster alone are not enough."
Sir Menzies Campbell, the Liberal Democrat leader, criticised the large loans accepted by Conservatives and Labour before the last election. He said: "The Liberal Democrats have already called for changes in election law to make it impossible to arrange such secret loans in future. We have also led demands for a reduction in national campaign expenditure limits, a cap of £50,000 on large donations to be applied to all parties at the same time and a limited extension to state funding of our democracy.
"The short-term solution to the problem of scandal surrounding the nominations for peerages is immediate transparency.
"But the real answer is to have a proper democratic and accountable method for choosing members of the House of Lords."