Political parties' reliance on large donations from individuals or trade unions means there is "bound to be suspicion" about honours and other favours, a public standards watchdog chief said today.
Sir Christopher Kelly, the chairman of the Committee on Standards in Public Life, told BBC Radio 4's Today programme he could understand why people raised questions about party donors on the honours list.
In the New Year's Honours list, Paul Ruddock was knighted for services to the arts. He has given £500,000 to the Conservative Party.
Sir Christopher said: "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.
"As long as they have an arrangement by which they, the political parties, depend for their very existence on very large donations from rich individuals and organisations like trade unions, then there is bound to be suspicion about favours being granted.
"The present arrangement not only undermines public confidence in the integrity of the political system but it's particularly very unfair to individuals who are given honours for perfectly valid reasons."
Asked if the situation boosted the argument for public funding, Sir Christopher 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 it.
"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."