Labour will scrap Levy's post and use network of fundraisers

Labour is to scrap the system under which Lord Levy, a close ally of Tony Blair, acts as the party's chief fundraiser.

When Mr Blair stands down as Prime Minister, Labour officials plan to replace Lord Levy with a network of several people responsible for raising money for the cash-starved party, which has plunged £27m into the red since last year's general election.

Gordon Brown, the man most likely to succeed Mr Blair, is expected to endorse the reform as part of his drive to clean up politics in an attempt to restore the voters' trust in it.

One senior Labour figure said: "It is clear that the present system will not continue under the new regime. There will be a network of fundraisers rather than a single figure. There will be no more parallel operations."

One of the new fund-raisers may be Anthony Bailey, an inter-faith campaigner and businessman whose offer of £500,000 was turned down by Labour last year after opposition from Lord Levy but who has now been accepted as donor.

Mr Bailey has helped to raise £8m for Mr Blair's flagship city academy schools programme and has said he could get large donations from wealthy Arabs, Catholics and Muslims. But party sources insisted he would not be "a new Lord Levy" and only member of a fundraising team.

The shake-up is seen as a criticism of Mr Blair rather than Lord Levy, who might be tempted to stand down from his fundraising role when the Prime Minister leaves Downing Street - probably next year.

Members of Labour's national executive committee (NEC) were furious they were kept in the dark about £14m of secret loans secured by Lord Levy with Mr Blair's knowledge before the election. The loans emerged after four businessmen who lent a total of £4.5m were recommended for peerages but blocked by the House of Lords Appointments Commission.

The "cash for honours" affair has led to a Metropolitan Police investigation which saw Lord Levy arrested and bailed in July. He has insisted he has done nothing wrong and is determined to clear his name.

NEC members, who are legally responsible for the party's finances, want to ensure they are fully involved and informed about future donations. Some regard the fundraising role of Lord Levy - who is also the Prime Minister's tennis partner and envoy to the Middle East - as too secretive.

The NEC is already reasserting its authority over the remaining period of Mr Blair's leadership. Last month, it discussed a report calling for new guidelines to ensure all political and financial decisions are properly approved by the NEC and recorded.

The ability of all parties to rely on wealthy backers is likely to be curbed under plans to extend taxpayers' funding of politics. A survey published yesterday by the New Politics Network found a growing consensus among the public and grassroots members of the three main parties for state funding to be coupled with a reduced spending limit of £15m for each party on elections, a cap on individual donations of about £50,000 a year and tax relief on donations.

The poll of 500 people, including 330 party activists, found strong opposition to banning donations from trade unions, including from half of Tory activists. There was strong backing for for restricting public funds to parties that are internally democratic and open to anyone to join, ruling out parties such as the BNP.

Peter Facey, the network's director, said: "There appears to be more cross-party consensus amongst party activists on the issue of party funding than it at first appears. In particular there is a clear consensus that spending limits should be reduced and caps on individual donations should be introduced."