Darling will announce a ban on 'arm's-length bodies' hiring external lobbying consultancies when he addresses the House of Commons on 24 March. Under the plans, about 750 state-funded quangos would be affected - including 43 grant-giving organisations, 145 service delivery bodies and 54 regulators.
The move is intended to deliver millions of pounds of savings, but could have catastrophic consequences for some PR consultancies (see box).
The new policy has been drawn up by Treasury officials off the back of the Smarter Government review, unveiled last year by chief secretary to the Treasury Liam Byrne.
The review set out tentative plans to reform arm's-length bodies, which receive £80bn per year of government funding. It stated: 'We will merge and abolish more than 120 ALBs and publish stronger governance proposals in the New Year on ALBs, as well as the results of a review by Budget 2010. This will deliver at least £500m in savings.'
A Budget day announcement on lobbying will be viewed as an attempt by Labour to outflank the Conservative Party, which has already promised to introduce restrictions on public sector lobbying.
Shadow cabinet office minister Nick Hurd has said the Tories would introduce 'rules to stop public sector bodies hiring lobbyists to bid for more funds or legislative favours'.
The Tories claim this would save the taxpayer more than £2m per year.
The move is likely to prompt outrage from public affairs agency bosses who believe it would force public bodies to provide the same function in-house, possibly under a different name. This could result in more public cash being spent on lobbying, it is argued.
WHO WILL BE HIT?
Weber Shandwick, Grayling, Fishburn Hedges and Connect Public Affairs are the big providers of public affairs consultancy services to government-funded bodies
In January 2010, The Sunday Times ran a front-page story on the Audit Commission's use of Connect Public Affairs
In December 2008, a Tory Party report said Fishburn Hedges received £990,710 from Jobcentre Plus.