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The move could spell the end of the multimillion-pound campaigns traditionally seen at election times and would be bad news for the poster industry. Instead, the parties would rely on tactical ads.

The idea has arisen during informal talks between Labour and the Tories about whether to bring in state funding for political parties following the tide of allegations that Labour donors have received special favours from the Government.

The Tories oppose state funding, but are prepared to consider a cap on individual donations and a reduction in the £20 million limit for each party's election campaign. Within the current ceiling, there is no specific limit on ads.

Some politicians believe a cap on ad budgets would make state funding more acceptable to the public.

"People wouldn't want to see their money spent on plastering the country with posters,

one Labour source said.

The two main parties have grown increasingly sceptical about the value of the election blitzes and so advertising could be a casualty as they struggle to raise money following a new law requiring them to name all donors giving more than £5,000.

In recent elections, advertising has been on a downward path. In 1997, Labour spent £7.3 million on ads, but at last year's election its budget was £5 million. The Tories spent £13.1 million in 1997 and £4.5 million last year.

A cap on advertising is likely to be considered by the Electoral Commission and the Commons Select Committee on Transport, Local Government and the Regions, which are both launching inquiries into political funding.