The Government has withdrawn an offer to abandon a raise in election spending caps for political parties. This follows Labour's refusal to join an all-party review of political party funding.
In a strongly worded letter on Friday, the Taoiseach, Mr Ahern, accused the leader of the Labour Party, Mr Ruairi Quinn, of consistently distorting the position of Fianna Fail.
Last Thursday, the Minister for the Environment, Mr Dempsey, offered to drop plans to let parties spend up to £30,000 on each candidate's campaign in five-seat constituencies, and less in three- and four-seat constituencies.
The quick rejection by Mr Quinn of the Minister's proposal heavily influenced the terse tone of Mr Ahern's letter, Government sources said last night. "We really have taken enough of this," said one.
Labour insists Fianna Fail accepts the principle that corporate donations must be banned before it will reopen talks in the all-party committee that sat for several months last year.
In his letter, Mr Ahern said: "We support expenditure limits but believe that the existing ones are set at a level which can constrain parties and candidates from undertaking reasonable and often basic election activity."
Fianna Fail's position is entirely consistent, he said. All political parties had run into difficulties with the Public Office Commission over spending in the 1997 General Election.
The spending limits in three- and four-seat constituencies would have increased beyond Mr Dempsey's figures if they had been tied to the Consumer Price Index, while five-seater limits would be just a little behind, he argued.
He rejected the Labour charge that Fianna Fail would benefit most from such increases: "There is complete and absolute equity between parties and candidates of all types. No disproportionate benefit will accrue to any party, or candidate.
"The change which we are proposing will benefit all parties and candidates, allowing them to undertake moderate campaigns during elections without risking breaches of the law.
"This is a reasonable, balanced and fully equitable approach which is consistent with the position which we have advocated for some time," he said. The issue could be sorted out quickly if all parties became involved.
Fianna Fail and the Progressive Democrats believe it is now possible to argue that the Fine Gael/Esat £33,000 controversy has made it easier to argue that corporate donations should not be banned.
"Who gave the money in this case? A company, or a person? The thing that matters is the level of donations that are allowed - not whether they are made by an individual, or a company," said a Government source.
Increases in election spending limits were a priority for Fianna Fail, said a senior Government figure. "You are going to have the most boring election campaign in the world next time," he complained.
On Sunday, the Tanaiste, Ms Harney, suggested business donations should be allowed, but kept below £4,000 a year. Yesterday, a PD official said the level could be even lower.
Last night Mr Quinn said it remained Labour's bottom line that it would not rejoin the committee unless corporate donations were banned.
He rejected Mr Ahern's assertion that all parties had had difficulties with the Public Offices Commission over spending in the 1997 campaign, arguing that Labour had overspent by just 62p in one constituency and £497 in another.
