- guardian.co.uk, Friday 2 March 2001 14.52 GMT
The cash, known as Short money, is supposed to be deployed solely to further the Conservative's "parliamentary opposition" to the government.
The committee report, agreed on Wednesday, states: "There is an urgent need for stricter regulation as to what Short money may be spent on and more transparency as to how it has been spent."
The committee proposes that leader of the house, Margaret Beckett, should "take an early opportunity to table an amended resolution so that the house can agree, more precisely, on what Short money may be spent and how exactly it is to be accounted for".
The report also proposes that it would be appropriate for political parties to publish accounts of how they spend their Short money.
It notes that the Conservative party and its auditors, PricewaterhouseCoopers, "were unable to give a categorical assurance that its Short money funding was used exclusively for parliamentary business".
The committee also expresses concerns that the Conservatives, after approaching the parliamentary fees office, agreed a description of how its Short money could be spent "which seems to allow more latitude in how this money is spent".
It points out that this definition was agreed privately between the Tories and the fees office "without consideration by parliament".
The committee was split over its findings, with Tory members claiming the inquiry went beyond its remit. Sources suggested that Tory MPs on the committee made as many as 18 attempts to remove any reference to Short money in the report.
The inquiry discovered that the Conservatives had renegotiated the definition of legitimate use of the Short money in a private negotiation with the fees office in May 2000.
The wider definition proposed by the Conservatives was accepted apparently without change by the house authorities. Conservative leaders had gone to the fees office after they were urged to do so by PricewaterhouseCoopers.
The wider definition stated the Short money covered "research associated with front bench duties, developing and communicating alternative policies to those of the government of the day, and shadowing the government's front bench. It does not include political campaigning and similar partisan activities, political fundraising, membership campaigns or personal or private business of any kind".
The select committee in its report, to be published next week, states: "We are not clear how 'communicating alternative policies to those of the government of the day' which is permitted under the expanded definition is different from political campaigning which is not".
However, Labour claimed the Tories were not using the money to further their efficiency as a parliamentary opposition, but to fund their election war room and communicate their policies to a wider electorate. Labour's general secretary, Margaret McDonagh, called for the Short cash to be audited separately.
In a memorandum to the committee, the fees office admitted the new definition was circulated for comment and final approval only to the official opposition, the accounting officer and the national audit office. The other parties were informed in August 2000 only when the new definition was included in the "notes for the auditor" which form part of the rewritten audit certificate.
During the inquiry, David Prior, Conservative chief executive, repeatedly insisted the wider definition did not extend to partisan activity or propaganda. Mr Prior told the committee: "I have increasingly come to the view that a large measure of state funding is something that I would be in favour of."
