Fresh calls have been made to cap party donations at a low level to avoid raising suspicions that peerages and other honours are being given to donors in return for large injections of cash into ruling party funds.
The chairman of the Committee on Standards in Public Life said that individuals who makes large donations to political parties and later receive a peerage are "bound to raise suspicion".
Sir Christopher Kelly's comments followed the row over the New Year's Honours list. Questions were raised over the knighthood of Paul Ruddock, CEO of Landsdowne Partners, after it was revealed that he has donated half a million pounds to the Conservative Party over the last decade.
"As long as they have an arrangement by which they, the political parties, depend for their existence on very large donations from rich individuals and organisations like trade unions, then there is bound to be suspicion about favours being granted," said Kelly.
"I don't think it's a point about the honours system - I think it's a point about the way the political parties in this country are funded.
"The present arrangement not only undermines public confidence in the integrity of the political system but it's particularly unfair to individuals who are given honours for valid reasons."
Asked if the situation boosted the argument for public funding of political parties, Kelly said: "We have looked at this issue for a very long time.
"There are no easy solutions to it. If there were, we would have adopted [them].
"The only way to prevent suspicion or the reality of political funding being corrupt is simply not allowing people to give large amounts. Our proposal was a limit of £10,000.
"If the cap was set at a low enough level to convince the public that the issue had been dealt with, then, regrettably, a small amount of public funding is inevitable."