Controversial changes to boost taxpayer funding to political parties have been killed off by a Coalition decision to renege on an agreement with the Government.

Key points

Tony Abbott declares Coalition won't back funding deal

Tony Abbott declares Coalition won't back funding deal Abbott wrote to Government on Friday to support the package

Abbott wrote to Government on Friday to support the package Apparent U-turn comes after backbench rebellion

Apparent U-turn comes after backbench rebellion Abbott declined to say if he had been 'rolled'

Under the proposal, parties and successful independent MPs would have been paid 33 cents a year - or $1 over the electoral cycle - for every primary vote.

Legislation was due to be introduced to parliament today, but the Coalition asked for it be pulled in the face of growing backbench disquiet.

And this morning Opposition Leader Tony Abbott declared that the Coalition has "listened, we've learned, and the bill is now dead".

"It's pretty clear the people have spoken and the electoral funding bill is dead," Mr Abbott said.

"I've had further discussions with my colleagues this morning, and the firm view that I've now formed is that this is not the right time for a bill like this, and it simply won't be supported by the Coalition. Not now, not for the foreseeable future.

"In the end democratic political leaders have got to be conscious of the mood of the public."

The legislation would have also reduced the threshold at which political parties had to disclose private donations from the current level of $12,100 to $5,000. However, that change has also been scuttled.

"Something for which there is a reasonable argument can be trumped by the particular circumstances of this time," Mr Abbott said.

Government released letter to pile pressure on Abbott

Barely an hour before Mr Abbott spoke, the Federal Government had moved to pressure the Opposition over its stance on the changes, releasing a letter signed by Mr Abbott stating that he was "satisfied with the agreement reached" between the two major parties.

Attorney-General Mark Dreyfus released the letter, received by him from Mr Abbott, and dated last Friday.

"The Opposition has given the clearest possible confirmation of their agreement to the reforms that are proposed and to the bill," Mr Dreyfus said.

"I would suggest that if you have further questions about the position of the Opposition they be directed to Mr Abbott."

Sorry, this video has expired Dreyfus produces letter from Abbott

The Coalition asked the Government to hold back the bill after an emergency phone hook-up of the Liberal Party's federal executive late yesterday.

The letter, signed by Mr Abbott, states that he had been briefed by shadow special minister of state Bronwyn Bishop about the agreement, negotiated between former special minister of state Gary Gray, Liberal Party federal director Brian Loughnane, and the ALP national secretary George Wright.

"I am satisfied with the agreement reached and indicate the Coalition's intention to support the legislation and to deal with it, as requested, before the end of the sittings," the letter states.

However, today Mr Abbott explained that he changed his mind after discussions with his colleagues.

"There is an argument for public funding," he said.

"It would make political parties less dependent on donations that may not always be made for entirely altruistic reasons.

"Obviously, we're at the fag end of a very contentious parliament, obviously we do have a budget emergency at this time, and given there have been a lot of significant cuts in the budget it was going to be a very big ask to say to the public that we are cutting you - but oh by the way here's $60 million in additional public funding for political parties," he said.

"My colleagues have been listening to the electorate and we have listened, we have learned, and this bill is dead."

Mr Abbott would not answer questions about whether he had been rolled by his leadership team.

Gillard accuses Abbott of being untrustworthy

Prime Minister Julia Gillard has used Mr Abbott's backflip to accuse him of not being trustworthy.

"Mr Abbott has said to the nation that you can trust him if he signs on the dotted line," she said.

"He said to the nation that you can trust what's in writing.

"Even if Mr Abbott signs the dotted line, you can't trust it.

"There's a huge gulf between what Mr Abbott says and what Mr Abbott does."

Coalition MPs spoke out against deal

Several Coalition MPs had told the ABC that the changes were a "bad look" given the budget situation, and they would not support it.

The measure was to have been backdated until April 1 - a step that would have delivered a $2 million windfall to the major parties to spend on this year's federal election.

Earlier Liberal backbencher Dennis Jensen said he believed the Coalition should walk away from the changes.

"It is not a good look and, in short, yes I think we should," he said.

Nationals MPs met yesterday afternoon to discuss their concerns.

Nationals Senator John Williams told Radio National that it would be hypocritical for him to back the changes.

"We've got a serious budget problem - all Australia knows that," he said.

"We've cut family benefits here and there, we've got the single mums back onto NewStart.

"You can't go out and do that to the people and support it and support a stronger, firmer budget to get back in the black, and then on the next hand say 'Oh, look - up to $60 million may go to political parties from public funding'.

"I just can't do that."

Labor MP Andrew Leigh has accused the Coalition of only being interested in the extra funding for political parties and not the improved transparency measures.

"There are strong elements of this package - transparency, non-profiting from election, banning foreign donations - that are Labor principles, and that Labor has argued for in these negotiations," he said.

"The Coalition hasn't backed any of these principles. They've come to support this package for other elements of it."

The funding package - worth more than $50 million - would have come on top of the $2.47 per vote candidates already get if they attract more than 4 per cent of the primary vote.