A former minister has predicted that the government will introduce state funding of political parties.

Alan Whitehead, a minister at the Department for Transport, Local Government and the Regions until the recent reshuffle, made the statement during a Westminster Hall debate on the future funding of political parties.

Beginning the debate, Liberal Democrat MP Matthew Taylor warned that political parties had become "increasingly focussed" on attracting funds from a "tiny number of personally wealthy individuals".

"It raises questions over what individuals seek for this, and what they may be given for this," said the Truro and St Austell MP.

He said the public were increasingly concerned about the issue which was damaging the reputation of all political parties.

"I believe what is happening at the moment is the worst of all worlds."

Taylor believes donations should be capped so that there could be "no suggestion, no belief" that they influenced policy.

But politicians would still need cash to fund campaigning.

"I believe we need a system of match funding," he said. The state should match smaller donations from individuals, though it needn't necessarily be on a pound-for-pound basis.

There would also have to be safeguards to ensure the money went to "legitimate" parties, though Taylor didn't exclude money going to extremist parties.

"It should be all about the ability to find people who will join, support and make small donations to support their political beliefs," he said.

Former minister Alan Whitehead said donations had been "substantially cleaned up".

The Southampton Test MP argued that public involvement in participative politics was "alive and well", it was party politics that was suffering most.

And Whitehead, who has previously responded to debates on party funding for the government, said he was "reasonably confident" in predicting that state funding "will happen so we might as well take care that we do it well".

But he said there would have to be a consensus on the issue, to prevent another party getting a "free ride" from the funding while publicly opposing any such move.

Earlier, Caroline Flint told MPs that "democracy isn't cheap".

She said the cap on election spending might need to be reduced and proposed that tax relief could be introduced for political donations up to £5000, in the same way that charitable donations could be offset against tax bills.

Flint, Labour MP for Don Valley, also suggested a "democracy fund" to which companies interested in supporting politics could make donations, with the Electoral Commission administering the funds along the lines of a blind trust.

"It is one way in which the larger donations could be channelled in a way which would lead us away from some of the present publicity," she said.

Robert Syms, vice-chairman of the Conservative Party, called for "wide public debate" on the issue.

"At the moment we're opposed to the state funding of parties," he said.

Trade unions or political action committees could continue to fund campaigning, he warned, while others would face restrictions. "I don't see why wealthy individuals should be excluded from spending their money in the way that they want to," he said.

Labour MP for Bassetlaw, John Mann, proposed that the canvassers ask the public whether they were prepared to pay for the leaflets the parties hand out. He said voters were unlikely to be receptive.