Prime Minister John Key says he is "not completely closed" to the prospect of using more public funding to run political parties and their campaigns - an apparent softening of National's vehement opposition to such suggestions in the past.

The question of public funding of parties is one of the central issues of a review of electoral finance law to find a replacement to the now repealed Electoral Finance Act.

Currently, the only state funding for party campaigns is about $3 million in broadcasting allocation to registered parties for election advertising on television and radio.

An issues paper for public feedback includes discussion about furthering the public funding of political parties, including listing the pros and cons, discussing other countries' practice and potential models of funding.

Yesterday Mr Key said he was "not completely closed" to the idea but "it would be a big step to make". He said including it in the review did not necessarily mean changes would follow, but it was not possible to have to a multi-party debate without including it as an option. "It's quite a weighty decision for political parties to make, but this is a wide-ranging issues paper looking at electoral reform and I don't think it would have been a credible exercise if that hadn't been put on the table."

While Labour and the Green Party have previously supported some form of using the public purse to pay the running costs of political parties, National has been opposed to it.

Last year, then shadow treasurer Bill English strongly criticised Labour for trying to formalise a raid on the public purse after revelations it had initially signed off on a $3.1 million package of state funding for political parties - a decision rescinded before the Electoral Finance Bill was introduced.

Green Party co-leader Russel Norman said his party supported at least partial public funding and limits on how much one donor could donate to ensure parties were not dependent on a few wealthy donors.

"If it costs a couple of million to provide partial funding to ensure parties are not captured by vested interests, then it's money well spent."

The issues paper says many Western countries, including Australia, Canada, Ireland and Germany, have direct financial support for parties, which "recognises the important role parties play in the democratic process".

It said supporters believed it would limit "actual or perceived corruption or inappropriate influence" because parties would not be as dependent on private donors. It would also help ensure an even playing field for parties whose supporters were not wealthy.

However, opponents of it believed it would undermine the independence of parties and be an "inappropriate" use of taxpayers' money.

Introducing more public funding could also have a flow-on effect to donations' rules.

Many countries where parties do get money from the taxpayer have tighter restrictions on donations, including limiting the amount one person can give and prohibiting donations from corporations and trade unions.

The review will also look at whether the rules for Parliamentary Services funding for MPs are sufficiently clear that it can not be used for election campaigns.

The money is meant to be used for Parliamentary purposes, but only explicit electioneering is prohibited, giving parties some leeway to use it for more subtle campaigning which is considered election advertising under election laws.

Submissions on the issues paper close on June 26. Public forums will be held on June 4 in Christchurch, June 8 in Auckland and June 9 in Wellington. has further details.