Nick Clegg has quite rightly raised the issue of party funding. Clearly, along with the raising of funds, the issue of expenditure should also be reviewed. It is a nonsense that the likes of Lord Ashcroft should be able to pour vast funds into marginal seats between elections (it will be interesting to see some research on how effective this was) and that rich individuals can buy influence by making huge donations to the party of their choice.
State funding, along with strict limits on individual donations and expenditure between and during elections, is clearly required. The great problem with adequate state funding is not that it is unpopular with the electorate, but that it allows the parties' headquarters and and even local branches to operate in their own private bubble, financed by " manna from heaven" and no longer needing to connect with the public, save at election time, in order to persuade us to support them financially and physically.
A simple way round this was described in an article in Liberal Democrat News a few years ago. In essence, parliament should decide how much in total the state should fund the parties collectively. This sum is divided by the number of the electorate and each person on the electoral roll is sent a voucher for the appropriate amount.
For simplicity, if the total sum is £100 million per year and the electorate is 40 million, then each person on the electoral roll receives a voucher for £2.50. Party members and committed supporters will promptly send the voucher to the party of their choice, who will cash it in with the Treasury. A few "plague on all your houses" individuals will throw it into the fire, but most will do nothing. It is then up to party supporters to go round, explain the virtues of their party and persuade the electors to give the voucher to them for forwarding to headquarters, and , of course, vote for their party next time.
The value of the scheme is that heightens the need for the parties to keep in touch with the people every year (if not exactly "all the year round!"), rather than disengage further, except at election time, which is the likely result of state funding direct to the parties' headquarters.
The above is a bare (and perhaps partly mis-remembered) outline of the scheme. It would be useful if Liberal Democrat News would re-publish the article.