A government minister has pushed forward the debate on state funding of political parties, saying cash should be made available to local organisations.

Peter Hain, the outspoken minister for Europe, said that the additional funding could be used to encourage more people to get involved in the grassroots process of politics.

Political life would be "much healthier" if the parties involved the public more, he said.

But Hain, who has previously spoken of the threat to links between the Labour Party and its union backers, said the cash should not be used to replace other sources of funding.

"State funding is already going to parties. There's not a new principle here. Five million goes each year to opposition parties in parliament to organise themselves, and in an election year, when you take into account free post and party political broadcasts, around £44 million of public money is provided," he told BBC Radio 4's World at One programme.

"The principle has been established. The question I think should be proceeded with is now to really strengthen local community organisation of parties, so they become much better related to their local electorate and their communities and involve people in politics in a more participatory manner at a local level."

Following a series of rows over party funding and "cash for access", the latest comments indicate that the government is seeking new ways to raise party funds.

The prime minister has insisted any changes to the current system would need to be based on cross-party consensus.

Hain rejected suggestions donations should be capped and dismissed the recent row over the RMT unions decision to withdraw funding from some Labour MPs.

"I'm not in favour of capping donations," he said. "I'm in favour of unions deciding to donate to the Labour Party according to what their members determine.

"It's not a question of being hostage to anybody. It's a question of having a modern relationship, not capping donations, but making them transparent and supplementing them with a more plural form of funding that... extends the existing principle where parties do receive public funds to strengthen local organisations and make our politics much healthier."