LONDON - A parliamentary report into the "cash for honours" scandal called on Wednesday for prime ministers to be stripped of the power to appoint peers to the House of Lords.

The report by the Commons Public Administration Committee follows a 16-month police inquiry into allegations of political corruption which overshadowed former Prime Minister Tony Blair's last months in office.

The committee's inquiry was suspended during the police probe, which was launched in March last year after allegations that political parties had nominated donors for seats in the Lords in return for cash or loans before the 2005 election.

The inquiry restarted after prosecutors announced in July this year that no one would face any charges.

"Allegations were made that went to the heart of our political system," said Committee Chairman Tony Wright.

"The fact that no charges were brought has not diminished the damage that has been done to trust in public life.

"We want to rule out even the possibility that individuals could buy a seat in our parliament."

In its report, the committee criticised legislation from 2000 which had created a loophole allowing commercial loans to political parties to go undeclared -- without defining what it meant by "commercial."

But the committee also criticised political parties, saying "having designed the loophole, parties did not have to dive through it so assiduously."

"A deliberate attempt was made to stretch the loophole on commercial loans as far as it would go," the report said.

"The letter of the law may not have been broken, but the spirit of the law was quite clear."

The report's recommendations include breaking the link between the honours system and seats in parliament, so that a political peerage would not give the recipient a seat in the Lords.

"A peerage is much more than an honour, not a prize but a duty," it said. "A seat in either House of Parliament should be sought for one reason only -- to serve the people."

The committee called for it to become a binding commitment on Gordon Brown and future prime ministers -- rather than a personal pledge -- not to put forward their own nominations for peerages.

Brown has followed the precedent set by Blair in 2006, who said he would desist from making any additions to or subtractions from the list of names produced by the independent Honours Committee.

The committee also called for a new law on corruption in public life and a stronger Electoral Commission, to regulate donations more effectively.