Spending on political campaigns should be capped, a report into party funding is expected to recommend.
Spending limits on political campaigns and caps on individual donations remain "obstacles" to a deal on party funding, Sir Hayden Phillips' review has said.
The long-awaited report from Sir Hayden Phillips, due to be published later, is also set to say that individual donations should be restricted.
His year-long review recommends both be capped, but despite "broad agreement" the parties had not agreed on details.
A legally binding limit of £50,000 is considered a likely figure for donations - whether from private backers, big business or trade unions.
However Sir Hayden believes a deal is "within reach" and is now to chair face-to-face talks between the parties.
Sir Hayden was commissioned by the prime minister to look into funding.
The review, which also backs a £25m a year rise in state funding, is designed to "restore public confidence".
His inquiry began in March 2006 after it emerged that to fund their 2005 General Election campaign, Labour was secretly loaned nearly £14m and the Conservatives £16m. The Liberal Democrats said they borrowed £850,000 from three backers.
Sir Hayden's inquiry was commissioned by Tony Blair in March 2006 after it emerged that to fund their 2005 General Election campaign, Labour was secretly loaned nearly £14m and the Conservatives £16m. The Liberal Democrats said they borrowed £850,000 from three backers.
Union backing
Achieving this will require tough decisions on all sides, particularly about donation limits and spending limits Sir Hayden Phillips
Limits on donations will anger many on the Labour side where union money dominates.
His recommendations also include the largest parties cutting spending between elections by £20m each.
Labour had proposed an annual spending cap of £15m, and would allow parties to set their own rules for donations - allowing its links with unions to remain.
The prime minister welcomed Sir Hayden's report, saying "it shows very clearly that there is now the basis for a new agreement on the funding and expenditure of political parties".
And the Conservatives will have objections as well, especially as Sir Hayden is expected to call for limits on spending both at national level and in individual constituencies, something the party has exploited to win marginal seats in the past.
He said he hoped consensus could be reached in talks between the three main parties before the summer recess in mid-July.
The Tories have called for a large increase in state funding for all parties with more than two Commons seats, a cap of £50,000 on all donations, the phasing out of corporate donations - including from trade unions - and tax relief for donations.
Mr Blair said a deal would pave the way for legislation in the next parliamentary session.
Conservative Party chairman Francis Maude said the party accepted the report's main recommendations.
"We believe that all political parties should work together to achieve this," he said.
Liberal Democrat parliamentary spokesman David Heath said the key objective must be to restore public confidence in the political system.
"There are undoubtedly difficult areas for all of us to consider," he said.
Internet-based
In his 25-page report, Sir Hayden said a £50,000 limit on donations from individuals or organisations - as demanded by the Conservatives - would be "reasonable and attainable".
But he said this would create considerable difficulties for Labour if this meant it could no longer get considerable funding from trade unions.
One option would be to treat union donations as being made up of many individual gifts from members, he says.
This would only be acceptable if union members signed forms confirming they want their contribution to the union's political fund to support a particular party.
If there were to be an agreement, a cap on donations would lead to a fall in income so Sir Hayden recommends an increase in state funding.
He said state funding should be linked to backing among the public - proposing that eligible parties receive 50p each year for every vote cast for them in the most recent General Election and 25p for every vote in the most recent ballots for the Scottish Parliament, Welsh Assembly and European Parliament.
An alternative would be to use an internet-based subscription system where people's donations of £5 could be matched by state funding.
But Sir Hayden acknowledged the difficulties which remain saying: "Achieving this will require tough decisions on all sides, particularly about donation limits and spending limits."
Other recommendations include new measures to prevent the breach of regulations on donations, strengthened controls on expenditure by third parties, public access to better, clearer information about the sources of party income and new powers for the Electoral Commission watchdog to oversee the new system.
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