MPs to be banned from claiming mortgages

Tough new measures could trigger resignations at next election

MPs will be forced to rent their second homes and banned from putting relatives on their payrolls under sweeping moves to overhaul the expenses system, it emerged last night.

The proposals – to be phased in over five years – will be backed by the party leaders in an attempt to draw a line under the expenses scandal that has hit Westminster. But they are certain to trigger fury among MPs, and more resignations at the next election.

The Kelly committee, which is charged with reviewing the rules on MPs' allowances, is due to publish its plans next Wednesday. But the outline of its remedy for cleaning up the Commons emerged last night after the chairman, Sir Christopher Kelly, set out his proposals to the party leaders. He has concluded that it can no longer be justified for MPs to claim from taxpayers the cost of mortgage interest payments for second homes. In future, MPs will be required to move into rented accommodation to avoid accusations of profiteering from the property market at public expense – even if rental rates prove more expensive than mortgage interest.

Sir Christopher, the chairman of the Committee on Standards in Public Life, also confirmed that MPs would be barred from hiring spouses and other family members to work for them. That proposal, which will also be introduced over five years, has angered some politicians and even drawn threats of union action to protect jobs.

Sir Christopher will also recommend a reduction in the number of MPs eligible to claim the second homes allowance. Currently, only central London MPs are excluded from claiming for a second property but under the new rules any MP with a constituency in "reasonable commuting distance" of Westminster will have to meet their own accommodation costs. Up to 100 MPs living in south-east England could be affected. Those who do not qualify for second-home payments will also see their London allowances slashed.

The plan to ban relatives from working for MPs comes after Sir Christopher could find few instances of public sector jobs where similar arrangements were allowed. Politicians argue, however, that the unique nature of the job makes it appropriate for spouses to work together.

News of the proposal has already led to suggestions that MPs' wives may try to dodge the new rules by working for each other's husbands. Unite, the union representing staff in the Commons, has said it will use employment law to stop spouses and other relatives being sacked as a result of the move.

Dan Whittle, its parliamentary branch chairman, said: "The majority of the public want employment of family members to be transparent and regulated – not banned."

In June, Gordon Brown asked Sir Christopher to fashion a new system of expenses payments that will carry confidence with the public. Shortly after Sir Christopher's report is published, Sir Thomas Legg, who has been examining individual MPs' claims, will start sending out further demands to those politicians he believes received excessive amounts of taxpayers' money.

Yesterday, Bernard Jenkin, the Tory MP for North Essex since 1992, was told by Sir Thomas to repay £63,250 in expenses after claiming a second home allowance on a farmhouse owned by his sister-in-law. Mr Jenkin said he would challenge the demand, the largest so far.