Taxpayers to the rescue

The sound of stable doors banging shut echoed around Westminster yesterday, as Labour and the Conservatives set out separate plans to clean up party funding. It was hardly dignified, since both parties have been committing just the sort of abuses they now say they are eager to prevent and in both cases, the imperative is partly presentational. Lord Falconer set out proposals for reform not because he had always planned to, but to dismantle a political hand grenade that has landed in New Labour's lap. Likewise Conservative backing for tough rules (although based on work begun before claims of cash for peerages hit the papers) has been hurried forward with the double aim of making life awkward for the prime minister and pre-empting unpleasant stories about Tory fundraising. Generations of Conservative peers have received their titles in ways that David Cameron would prefer not to discuss and even now a party that can afford to pay its image-maker Steve Hilton £23,000 a month and paid Lord Saatchi's companies about £1.5m before last year's general election is one obviously dependant on big donations from rich donors. A lot of old ladies will have to sell a lot of homemade jam and cakes to raise that sort of cash.

But the immediate motive may not matter if the outcome is a better system. In the early 1990s, a series of scandals involving Conservative MPs and ministers produced improved scrutiny and a better regulation of outside interests. Now, revelations about loans and peerages stand an equal chance of forcing politicians of all parties to face up to the degrading and secretive nature of much party fundraising. Yesterday, in their separate ways, both Labour and the Conservatives responded with positive and original proposals. What counts is that these are now acted upon, not dropped, as difficult headlines fade from the front pages. That applies particularly to the Conservatives, who will find that change which looks attractive in opposition can lose its appeal if the prospect of power approaches.

Of all the reforms being put forward, the most obvious is to require parties to declare loans as well as donations. Lord Falconer promised to implement this yesterday in the current electoral administration bill, provided other parties and the Electoral Commission agree. They surely have no choice. Much less certain is the outcome of the new inquiry to be conducted into party funding by the former civil servant Sir Hayden Phillips. A quintessential Whitehall Mr Smooth, he may be the man to build consensus on an essential double reform, cutting campaign spending while letting the state take the burden of funding. In a way, this has already begun. To Labour's credit, the Electoral Commission limited national spending from 2001, while greatly-increased MPs' expenses, so-called Short payments to the opposition and new policy development funds mean that parties already depend on the state much more than they like to admit.

For this to go further, however, all parties will have to travel in step. Like cold war talks over slashing nuclear arsenals, one side will only make a move if they are sure the other will match it. Neither Labour nor the Conservatives want to fight an election with less money than their opponent. That is why yesterday's proposals from the Conservatives are good news. Drafted by the canny Tory reformer Andrew Tyrie (who speaks a lot of sense on modernising parliament, too), they mix state money with smaller donations (capped at £50,000) from more people. There are catches - not least what it implies for Labour's union funds - and of course, limits can always be evaded. Nor do taxpayers show any enthusiasm for footing the bill. In the end, public trust must be based on the people involved, not the rules that guide them. But the last week has shown that the system needs to be changed. Yesterday brought signs that it might even happen.