State must fund parties, says Labour donor

Tony Blair faces pressure from senior Labour figures to introduce state funding for political parties.

A group of influential businessman with links to the party, including Sir Sigmund Sternberg, one of its big donors, is calling for a review of funding.

Sir Sigmund, who has given more than ?400,000 to Labour in the past four years, believes Labour can no longer rely on being bankrolled by a small number of large donors.

He has warned Mr Blair that many donors may stop donations or have already done so because they are accused of cronyism. "It is difficult for donors like myself to continue supporting a political party as we are faced with ... allegations we are only making the donation in order to receive some kind of personal or business benefit," said Sir Sigmund.

He called the system "unsustainable" and the only solution was to bring in state funding. Sir Sigmund said he wanted the Labour Finance and Industry Group - a pro-Labour think tank set up by the business community - to launch an inquiry into party funding.

He suggested a cap on small donations of ?2,000 but said he would continue to fund Labour.