A plan to give £30m a year of state funding to political parties, ending their bank-rolling by millionaire donors and trade unions, will be published next month.
Under the blueprint, which has already won the backing of senior Labour figures and is expected to find common ground with the Tories, individual donations to parties would be limited to £5,000 a year and the identity of anyone giving more than £1,000 would be disclosed.
To encourage the parties to obtain small donations from the public, the state would provide top-up grants on a sliding scale. A gift of £10 would be matched by £15 by the Government. But a £100 donation would attract only £50. Pressure on Tony Blair to bring in state handouts increased yesterday when Labour's annual report revealed that the party made a record loss of £8.9m last year, although it had a £4.3m surplus in 2000. Membership slumped from 317,000 to 272,000 in the 12 months to January 2002.
The proposals will be published on 15 October by the Institute for Public Policy Research (IPPR), a think-tank with close links to Downing Street, which investigated state funding in the hope of finding an all-party consensus. The IPPR estimates that the total state subsidy to be shared by the parties would be about £30m a year. Mr Blair is attracted by taxpayer-funding but has said he will not proceed without agreement across the parties. The IPPR has produced a formula designed to win the Opposition's backing. Significantly, the Tories support tax relief on small donations. One of the report's most controversial recommendations is to take the decision on union donations to Labour out of the hands of union bosses by allowing individual members to pay a small affiliation fee if they wish.
Peter Hain, the minister for Europe and a supporter of state funding, will tell a fringe meeting at the TUC conference in Blackpool today that he would oppose it if it were "a device to cut the unions out of the party". He will warn that the IPPR plan for a cap on donations would be "arbitrary, difficult to police properly and infringe the right to donate".
The IPPR believes the new generation of independent-minded union leaders will back it.
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