Labour leader Ed Miliband has offered to limit donations to his party from trade unions to £5,000, as leaders discuss how to change the system.
He told the BBC this would remove the influence of "big money" on politics.
But Mr Miliband also said he wanted to keep the system under which union members are asked whether they want to keep paying £3 a year to Labour.
Around three million people choose to do this. The Conservatives want more restrictions on union donations.
The three main political began talks last week on the way political parties are funded.
The issue has been the subject of an ongoing row between Labour and the Conservatives.
'Much tougher'Labour argues that large businesses are providing too much of the Tories' funding, while the Conservatives say Labour is itself too reliant on lump sums given by affiliated unions, such as Unite and Unison.
Speaking on the BBC's Andrew Marr Show, Mr Miliband suggested a cap of £5,000 on individual donations to parties.
This is half the £10,000 proposed by the Parliamentary Standards Commissioner, Sir Christopher Kelly, who wants to see a limit of £10,000.
The Conservatives currently want a cap of £50,000 on individual gifts.
But Mr Miliband would keep the system where members of unions affiliated to Labour are asked whether they would like to "opt out" of giving the party a levy of £3 a year, rather than changing to an "opt in".
He said: "We've got to change the way we fund politics and take big money out of politics...
"When people don't vote for the mainstream parties, it's because they don't believe that politics can change their lives."
He added: "We've got to have much tougher limits on spending...
"[When] I talk about a £5,000 donations limit it's got to apply to trade unions."
This would be "panful" as it would cost Labour "some millions of pounds", he said.
But Mr Miliband added that he believed in maintaining the links between Labour and the unions, via the donations from individual members.
He said: "It's not just that working people founded the Labour Party, but they keep us rooted in those communities now."
He added that about 40% of Labour's income was from its members, 40% from unions and the rest from individual donors.
