Prime Minister Gordon Brown today accepted "in full" the Kelly report on MPs' expenses, which said MPs should no longer be able to claim for their mortgages or employ family members at the taxpayer's expense.
Mr Brown wrote to Sir Christopher Kelly as his long-awaited report was published today, saying MPs should not seek to water down his controversial proposals.
The chairman of the Committee on Standards in Public Life said that his blueprint was "fair and reasonable" and would bring Westminster into line with other walks of life and other legislatures.
He acknowledged that his wide-ranging proposals would mean "substantial change" for MPs and said that, where necessary, they should be phased in with a suitable period of transition.
The key recommendations include giving the new Independent Parliamentary Standards Authority (IPSA) the power to determine the pay and pensions of MPs as well as their expenses.
Claims for mortgage interest should be brought to an end with "appropriate transitional provisions" of one more Parliament, or for five years.
The report said that there should be no further capital gains at public expense, and the controversial practice of "flipping" properties should no longer be possible.
Any capital gains made during the transitional period attributable to public support would have to be paid back to the taxpayer.
In future, MPs should only be able to claim for rent or hotel costs, while the expenses scheme should only cover council tax, utility bills, telephone line rental and calls, security, contents insurance and removals at the beginning and end of a tenancy.
The costs of cleaning, gardening, furnishings and other items would not be claimable.
The committee said that MPs with constituencies within "reasonable commuting distance" of Parliament should no longer be able to claim for a second home at all.
It said the practice of MPs employing members of their families should be brought to an end by the end of the next Parliament, or within five years.
Mr Brown wrote to Sir Christopher: "I accept your report. We need to establish a new system to re-establish trust.
"It is right that this new system is not determined, administered or amended by MPs.
"I therefore agree with your recommendation that it will be for the new IPSA to implement this new system."
Mr Brown's spokesman said: "He accepts the report in full."
The committee said that only MPs who lose their seats or whose departure from Parliament is "involuntary" should be entitled to claim the resettlement grant. Those who step down voluntarily should receive eight weeks' pay instead.
Removal of the grant should also be a sanction against MPs who are found to have "abused" the system.
The committee said that, in future, all expenses claims should be accompanied by receipts or other documentary evidence which should be published.
It did not recommend a ban on MPs taking outside employment such as journalism, but said that any such activity should be within "reasonable limits" and "transparent", with information available to voters at election time.
"The recommendations for change that we are publishing today aim to strike a balance - on the one hand ensuring that MPs are properly supported and fully reimbursed for necessary costs incurred in doing their important work, and on the other providing strong safeguards for the taxpayer to prevent the abuses of the past," Sir Christopher said.
"Our proposals are reasonable and fair and bring Westminster into line with other walks of life and other legislatures. They recognise the unique circumstances of an MP's life but are shorn of the special features which gave scope for exploitation."
MPs should also be prevented from being an MP at the same time as a member of a devolved administration - known as "double jobbing" - the committee said.
Sir Christopher said the recommendations should be implemented "in full" by the time of the next Parliament and urged party leaders to ensure they were.
The committee's proposals met the three tests set of them of accountability, transparency and reduced cost, he said.
"I recognise that this will be a demanding timetable - there is a lot of work for the new regulatory body to complete - but I see no reason why it should not be achievable if the will and determination are there.
"It is important that they both should. This committee will be watching closely."
A General Election must be held by June next year.
Sir Christopher told a press conference: "There is a risk that, as the impact of the revulsion caused by the Daily Telegraph revelation fades with time, some may be thinking of distancing themselves from their earlier expressed determination to implement our report in full.
"If so, that would, in my view, be an error. The damage that has been done by what has been revealed about past malpractice and about the culture that goes with it has been very considerable.
"I don't believe the trust in those who govern us will be restored unless those in authority show leadership and determination in putting the abuses of the past behind them, however uncomfortable that may be."
In its introduction to the report, the committee said there had been "a profound crisis of public confidence in the integrity of MPs" and warned that restoring trust would be a slow process.
"The public are understandably angry about a major systemic failure in an area where they are justified in expecting the highest standards," it said.
"MPs have been able to misuse for personal gain an expenses regime which was intended simply to reimburse them for the additional costs necessarily incurred in performing their jobs.
"Anger has been fuelled further by a perception that ordinary citizens are subject to restrictions in their own working lives which were not being applied in the same way to MPs, and by the reluctance of the House of Commons as a whole to recognise the need for reform until forced to do so."
The committee said the unwillingness of successive governments to raise MPs' basic pay, even when recommended by independent review bodies, had created a "sense of grievance".
"It has also led to a tendency to regard the expenses system, quite wrongly, as a substitute for higher salaries," it said.
But spouses who work for MPs immediately attacked the suggestion they should lose their jobs.
A statement from family employees, headed by Suzy Gale, wife of Tory MP Roger Gale, urged IPSA chief executive Andrew McDonald to reconsider the Kelly recommendations in order to find "a satisfactory way forward".
"A number of working spouses made submissions to the Committee on Standards in Public Life, and some gave evidence in person, in the expectation that the unique nature of the job that we do would be recognised," they said.
The committee said it was "confident" that the Kelly recommendations would reduce the £94 million annual cost of the expenses system, but declined to put a figure on the savings.
"The exact size of the savings which will be generated by the proposals is difficult to calculate, partly because of deficiencies resulting from the way in which the House has collated information about expenses in the past and partly because... the committee cannot be sure how these changes will affect the behaviour and spending patterns of individual MPs," said the report.
On MPs' accommodation alone, the report predicted savings of about £2.7 million annually.
But it warned that Commons authorities would not be able to recoup the full £5.1 million cost of the £10,400-a-year communications allowance when it was scrapped, as MPs could be expected to use other office allowances to fund newsletters and other contacts with constituents. The actual reduction in overall spending is likely to be about £2 million.
Meanwhile, tightening the eligibility criteria for the resettlement grant - currently worth up to £64,766 - could save about £5 million at election time.
Other savings could come from changes including a simpler administrative system, MPs paying for their own commuting costs, and retaining office equipment in public ownership.
But there would be some areas of increased spending, including the establishment of an accommodation agency, the higher cost of renting homes compared with paying a mortgage, and tighter auditing arrangements.
Senior Labour MP Sir Stuart Bell, who sits on the Speaker's Committee which is overseeing reform of the expenses system, said he expected the Commons to welcome the Kelly recommendations.
Sir Stuart told Sky News that some MPs may feel "victimised" by the new arrangements.
But he added: "This is what we got into. We've taken 30 years to dig this deep hole for ourselves on allowances.
"I welcome Kelly and I think the House overall will welcome Kelly and accept that it must get public confidence back, restore the reputation of the House and get on with the major issues of the day."
Sir Stuart said that MPs have not had a "proper" salary increase since 1976, but had instead been encouraged to rely on their allowances.
"I'm not suggesting we should get a proper salary raise, because the average salary is £24,000," he said.
"But I do think we should look at pay in relation to allowances and put ourselves in a situation where MPs will live on their pay and not have to claim any allowances at all, other than travel."
Matthew Elliott, chief executive of the TaxPayers' Alliance campaign group, said the public would not stand for the reforms being "watered down or cherry picked".
"Sir Christopher has produced a firm and fair set of proposals for reforming MPs' expenses, which do justice to taxpayers' concerns," he said.
"These rules would allow Parliament to take the first step on the road to regaining public confidence.
"It is now essential that his recommendations are adopted by Parliament and the new expenses authority immediately and in full.
"People will not stand for another fudge or any more obstructive behaviour.
"The Kelly report is the way forward for Parliament, and it must not be watered down or cherry picked in any way."
But Tory MP Roger Gale rejected the call for MPs to accept the reforms in full, warning there were parts of the report that did not stand up to "close scrutiny".
"It is the devil in the detail which does actually need to be examined.
"It looks fine on the surface - and most of it is, there is a huge amount that is very good and very welcome in the work that the Kelly committee has done and we should applaud that and I wouldn't want to take anything away from it - but there are details of this that, in terms of sheer practicality, don't stand up to too close scrutiny."
He went on: "The thought of some Parliamentary estate agency deciding whether or not I qualify for a one bedroom, two bedroom, three bedroom, house with a garden because I've got a dog or a cat is a nightmare.
"We do need a bit of common sense and pragmatism in this as well as, and I accept this entirely, mucking out the stables."
The committee recommended that the cap on accommodation allowance for MPs who live together should be increased.
In May, the then Speaker Michael Martin ordered that couples should only be allowed to claim one person's allowance between them.
But the report said they might require a "slightly larger" property, and incur higher utility bills.
"The committee suggests that MPs who live together as partners should be able to claim between them up to a total of one individual MP's cap on monthly rent or mortgage payments, plus one third of a second allowance," it said.
"At current levels this would equate to £1,667 per month."
Sir Christopher said the committee had decided against recommending that some MPs be stripped of their resettlement grants, but indicated that he believed action should be taken.
"What we think we have tried to do is to hand that back to the standards and privileges committee, pointing out to them that they have already got the ability to withhold the grant... and they should be prepared to use it," he told reporters.
He made a direct plea for MPs not to fight against the proposals: "There is a lot to be said for just getting on with things."
But Sir Christopher also hinted that salaries could need to rise.
"It is quite clear that... in the past, sometimes quite explicitly, leaders of parties have said we can't give you an increase in pay but we can give you more generous expenses, and that has led to a culture of entitlement in the House which has not been helpful," he said.
There had been a "culture of deference" in the Commons that had made it difficult for staff to challenge MPs over their claims, he added.
He went on: "The way in which expenses were dealt with by a large number of MPs was deplorable, and the public were quite right to deplore it."Reuse content