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The Tories were forced into yet another u-turn tonight, as they quietly scrapped plans to cut funding for opposition parties.

George Osborne last year unveiled the plan to slash by 19% so-called 'Short money', the taxpayer-funded cash given to opposition parties to fund their parliamentary offices.

The original plan would have cost the Labour party some £8million a year, and hit funding the Lib Dems, SNP and Ukip significantly.

In a heated debate last month, MPs accused ministers of trying to rig the system and create a 'one party state'.

But today, Labour whips negotiated a new deal with Tory Leader of the House Chris Grayling.

(Image: PA)

Instead of the 19% cut, the fund will increase annually by the CPI rate of inflation, instead of the slightly higher RPI rate used currently.

Labour sources said the climbdown was a "massive win" for Chief Whip Rosie Winterton, who had negotiated a "grown up deal" with the government.

They added: "It's a good deal for all sides."

Mr Grayling said the new proposals would still save the Treasury £3.6m.

As part of the deal, a new 'transparency regime' wil be introduced to the system next year, which will require parties to publish a detailed breakdown of Short money spending and senior staff salaries.

But a maximum cap of roughly £150,000 will be put in place for parties with fewer than 6 MPs.

That could be bad news for Ukip, who after gaining almost 6m votes at the 2015 General Election, were eligible to claim up to £670,000 in Short money.

But Ukip's only MP, Douglas Carswell last year rejected the Short money funding on principle - reportedly to the anger of others in Ukip HQ.

(Image: Reuters)

He publicly opposed the distribution of Short money to opposition parties in the House of Commons.

As word of the new deal spread, he said he welcomed the reduction in spending, but was "dismayed that the establishment parties have colluded in a cosy deal to reallocate what we didn’t spend so they can spend it themselves"

Mr Grayling added: "These balanced and reasonable proposals will deliver a significant saving of taxpayers’ money, reducing expenditure by 10.6% compared to forecast levels, and will further extend the Government’s ongoing transparency agenda."