Commons Leader Jack Straw has warned of the danger of capping donations to political parties - saying it could lead to undue influence being wielded by single-issue pressure groups.
Mr Straw, tasked by the Prime Minister with tackling party funding, told an Electoral Commission conference that experience in America had shown how funding caps could be avoided.
He said: "An important question is whether caps should be placed on donations. At first sight, this seems an attractive option that might remove both the suspicion of, and potential for, undue influence being exerted on political parties by financial backers. However, caps are by no means the straightforward answer. The US experience demonstrates rather too well the unintended consequences of what is theoretically a good idea."
Mr Straw continued: "Prevented by the Supreme Court from having caps on expenditure - which were deemed unconstitutional - the US introduced restrictions on donations.
"These restrictions in turn have given birth to an entire avoidance industry of third-party single-issue and negative campaigning organisations."
Mr Straw added: "Of more fundamental concern is the way the (American) funding laws could be contributing to the growth of single-issue politics.
"The effect of the campaign finance rules has been to channel money away from mainstream political parties into single-issue organisations, which are becoming increasingly powerful.
"That is not to say that single-issue groups do not have a part to play in the political process, but they should not become a substitute for - or exercise undue influence on - political parties.
"The US experience shows how changes to party finance laws can, unintentionally, make changes to an entire political culture."
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The Commons Leader also said current limits on national spending during election campaigns did not go far enough, as the distinction between national and local campaigning was becoming increasingly blurred.
