DAVID CAMERON has rejected Ed Miliband's proposal to impose a £5000 cap on individual donations to political parties as the Labour leader sought to seize the political initiative following the Falkirk row on alleged vote-rigging.

After last week's Prime Minister's Questions, when David Cameron branded his opposite number as weak, Mr Miliband attempted to get on the front foot.

He sought to paint the Tories as the party of privilege while he was initiating reforms to consolidate Labour as the party of the people.

Amid rowdy scenes, the Prime Minister insisted that, despite Mr Miliband's bid to reset his party's relationship with the unions, it was still bought by the likes of Unite general secretary Len McCluskey "lock, stock and block vote".

He said: "They have bought the policies, they have bought the candidates and they have bought the leader."

Mr Cameron dismissed the notion of a £5000 annual cap, saying this would lead to greater funding from the taxpayer.

However, Mr Miliband said the Conservative Party had received £25m in donations from hedge funds and suggested it was no coincidence such funds had received a £145m tax cut in this year's budget.

He said the big difference between Labour and the Tories was that Labour was funded by working people paying 6p a week while the Conservatives were bankrolled by big money.

The Labour leader accused the Prime Minister of ducking reform and said he had proved the Tories were "owned by a few millionaires at the top of society".

Later, the row carried on with the leaders' respective spin doctors. One of Mr Cameron's aides claimed Labour had scuppered cross-party talks on political funding – which collapsed a few days ago – shortly before proposing the "arbitrary" cap.

She added that Mr Miliband's call for an effective ban on MPs having full-time second jobs was a diversionary tactic.

However, an aide to the Labour leader said the cross-party talks only died when the Tories would not accept the proposed £5000 cap, having themselves proposed a cap of £250,000 over five years.

He added: "Nobody is talking about taxpayer funding of political parties. We are talking about an opportunity to take big money out of politics.

Meanwhile, Downing Street said it was notable Mr Miliband had not responded to the Prime Minister's offer to use the Bill on third party funding, currently going through Parliament, to legislate on the changes he wanted to see in union political levies.

However, Labour said there was no need for legislation to introduce measures for union members to opt-in to party affiliation.

Earlier, union chiefs cast doubts about Mr Miliband's groundbreaking move this week. Mr Miliband proposed members should opt in to paying an fee to Labour rather than be automatically affiliated.

The party gets £8m a year this way, much of which could be at stake as the three million trade unionists who are automatically enrolled could in future decide for themselves whether to pay.

GMB leader Paul Kenny predicted only 10% of his members would opt in, costing the party as much as £1m a year from his union. He said the move could end rather than mend the union link. Bectu general secretary Gerry Morrissey said it was unnecessary.