Gordon Brown said today there were "clear cases" of MPs who may have broken the law over expense claims but insisted that only "a few" MPs had abused the Westminster perks system.
The Prime Minister said he planned to introduce a binding "code of conduct" for MPs and warned other public institutions they would also face tougher scrutiny as part of a bid to clean up the system.
He also hinted that an independent review of the pay and perks system would call for a ban on controversial "golden handshake" pay-offs for MPs who stand down.
Speaking amid further embarrassing revelations of expense claims, including one Labour MP's bid to get back a £5 church donation from the taxpayer, the PM expressed his shock.
"What I have seen offends my Presbyterian conscience, what I have seen is something that is appalling," he told BBC1's Andrew Marr Show.
"I did not expect to see instances where there are clear cases which maybe have to be answered to for fraud."
"Most MPs are doing a good job. They are in for public service, they are in for what they give not what they can get. But where a few MPs have abused the system they have got to pay back and there has got to be punishment and discipline."
Asked if he wanted Scotland Yard, which is presently considering a criminal investigation, to get involved, he said: "That is a matter for the police."
Setting out plans for a Constitutional Reform Bill, he said it would include "a clause which sets out the responsibilities, a code of conduct for MPs. Then we will set up an independent external body that will manage these things from now on.
"We need an open, transparent democracy where all these things are above board. And if I may say so, it doesn't just affect the House of Commons, it affects the House of Lords and it may affect all public institutions that receive taxpayers' money.
"People want to know that where taxpayers' money is involved, the right decisions are being made. That is the clean up that has got to start immediately. It will have to affect public institutions, including the health service and all sorts of other institutions including, I suspect the BBC."
Mr Brown added: "If anybody has broken the law, they will end up, not just out of the Houses of Parliament, but will end up facing the consequences of the law and I do not shrink from that."
Tory leader David Cameron called yesterday for MPs who had claimed for non-existent mortgages to face "the full force of the law".
Mr Brown said he believed party leaders were "getting near to agreement about things that need to be done" but action would have to await the conclusions of the independent review of the system being carried out by Sir Christopher Kelly's Committee on Standards in Public Life.
Asked if he would block controversial pay-offs for MPs who have announced they will quit the Commons over the expenses issue, Mr Brown said: "I don't think that when the Kelly Committee reports that this thing will still be like it is."
Mr Cameron and Liberal Democrat leader Nick Clegg have both backed the introduction of a power of recall for constituents to force a by-election if their MP was found guilty of wrongdoing.
That was "something that people might debate".
The PM denied dithering and said all MPs had to be afforded "due process".
"Where something has been wrong, I have not hesitated to point out it's wrong but equally at the same time people have got to go through due process.," he said. "Let's get the full facts, not the partial facts we got from The Telegraph."
He went on: "Every MP will go through a 'star chamber' if you like. Every MP will got through a process where their receipts and expenses will be examined in detail for the last four years.
"Where there is wrongdoing, it will be exposed; where people need to be punished they will be punished where repayment needs to be made it will be made. I did not come into politics to allow a situation to develop where MPs ran away with money that they didn't deserve."
The Prime Minister defended his own record on expenses, telling the programme: "I feel that I have managed my affairs personally with the utmost integrity."
He also insisted he would reject any moves from within his Cabinet to encourage him to stand down.
Mr Brown said he would refuse to move aside even if senior Labour figures told him it would help the party retain seats as a general election, arguing that his focus was on tackling the recession and pushing through a programme of constitutional reform.
A poll today put Labour in third place behind the Tories and the Liberal Democrats for the first time in 22 years, while Foreign Secretary David Miliband used a newspaper article to call for a "new approach to politics".
With the party also expecting major losses in this week's local and European elections, speculation has been mounting about a possible leadership challenge.
But asked by Andrew Marr whether he would stand aside if Cabinet members said it would help Labour's chances at a general election, Mr Brown replied: "No, because I am dealing with the issues at hand. I am dealing with the economy every day."
Having already set out his plans for constitutional reform, the Prime Minister added: "I am dealing with the issues, and I am also dealing... with these constitutional issues. I am leading a debate on that but it has got to be thought through. It cannot be gimmicks. It's got to be serious, it has got to be ordered, and it has got to done in a calm way."Reuse content