State funding for political parties is now being considered by Number 10 following the latest row over the letter sent by Tony Blair to back a business deal organised by a Labour Party donor.

Number 10 is considering the move as a way of ending the run of "sleaze" rows over claims of cash for influence which has hit Labour and the Conservatives.

At PMQs yesterday Blair angrily denied any wrongdoing but refused to say whether his close aide Jonathon Powell knew about the £125,000 donation from steel boss Lakshmi Mittal when writing the letter to the Romanian government

Blair dismissed the row as "Garbagegate".