Coalition rocked as Laws quits over cash for partner

Only 18 days after he was appointed, Lib Dem Treasury minister was doomed by £40,000 in expense claims

The 18-day-old coalition looked fragile last night as the Chief Secretary to the Treasury, David Laws, resigned over expenses claims paid to his partner.

The 18-day-old coalition looked fragile last night as the Chief Secretary to the Treasury, David Laws, resigned over expenses claims paid to his partner.

Mr Laws, who friends said was "terrified" of being outed as gay, quit after it was revealed he claimed £40,000 in public money for rent paid to his long-term partner in apparent breach of House of Commons rules.

The resignation of the man charged with slashing the nation's £156bn deficit is a major blow to the coalition government formed by David Cameron and Nick Clegg less than three weeks ago. Mr Laws, in an emotional statement at the Treasury, said the past two days had been "the toughest of my life".

He had failed to declare to parliamentary authorities that he was claiming £950 in rent paid to his partner, James Lundie, because he did not want to reveal he was gay. When the story first broke on Friday evening, the MP for Yeovil initially claimed he had not considered himself to be in breach of parliamentary rules which defined partner as "one of a couple ... who although not married to each other or civil partners are living together and treat each other as spouses". He apologised and said he would repay the money, referring himself to the Standards Commissioner for investigation.

But after a day of anguished reflection and talks with Mr Cameron, Chancellor George Osborne and Mr Clegg, Mr Laws resigned shortly before 8pm. Mr Laws said: "I do not see how I can carry out my crucial work on the Budget and spending review while I have to deal with the private and public implications of recent revelations. I cannot escape the conclusion that what I did was somehow wrong."

Without referring to Mr Lundie, a lobbyist, by name, the MP added that he had an "overriding responsibility to those I love most and who I've exposed to scrutiny in this way".

Downing Street was struggling to avert a full-blown crisis by attempting to reassure the public that the Government was dealing with the economy. The Lib Dem Danny Alexander, who is currently on paternity leave, was appointed to replace Mr Laws. The Lib Dem MP Michael Moore replaced Mr Alexander as Secretary of State for Scotland. The Prime Minister made clear Mr Laws could expect to return to the Cabinet if cleared by the authorities.

Yet the revelation over the "secret" expenses arrangements overshadowed an announcement by the Prime Minister to extend transparency to help to "rebuild trust in our politics".

Mr Cameron faced another blow when it was claimed that one of his party's biggest donors had been blocked from becoming a peer because of apparent concerns over his tax affairs. The Sunday Times reported that the House of Lords Appointments Commission had rejected JCB boss Sir Anthony Bamford's nomination for a peerage after the tax authorities failed to support it.

Mr Laws had emerged as a key figure and bright talent in the new government, after he helped to negotiate the terms of the Conservative-Liberal Democrat coalition. But his position was undermined yesterday, when The Daily Telegraph published details of the rent he had paid to Mr Lundie, his partner since 2001.

Mr Laws claimed up to £950 a month for eight years to rent a room in two properties owned by Mr Lundie. But, since 2006, parliamentary rules have banned MPs from "leasing accommodation from a partner". For fear that changing the arrangement would "out" him as gay, the MP did not declare his relationship.

Mr Laws said it was "my decision alone" to stand down. Mr Cameron and Mr Clegg had initially backed his decision to refer himself to the Standards Commissioner but by yesterday morning Mr Laws was said to be "emotionally shattered" by the storm. He expressed regret for putting his political career ahead of "those I love most". "I have pursued a political career because of my sense of public duty, but I have too often put this before the interests of those I love most. I want to apologise to my constituents for falling below the standards that they are entitled to expect from me."

He thanked the Lib Dem leader and Mr Cameron for their support. Mr Clegg said he had "great respect" for the way Mr Laws had handled himself since the revelations emerged, and said his privacy had been "shattered". In a letter to Mr Laws, Mr Cameron said: "You are a good and honourable man ... In your short time at the Treasury, you have made a real difference, setting the Government on the right path to tackle the deficit which poses such a risk to our economy. I hope that, in time, you will be able to serve again as I think it is absolutely clear that you have a huge amount to offer our country."

In an interview with The Times, last Thursday, Mr Laws had said he was single. But, after details of his relationship emerged, he told the newspaper that homosexuality was not accepted by many people when he was growing up. He later told the paper: "I have kept this secret from everyone I know for every day of my life."

Mr Laws had been handed the task of piloting a huge cuts programme, starting with £6.2bn savings announced last week.

He had boasted in the past of his expenses record, pointing to a "dramatic underspend" on his London living costs. During the expenses scandal last year, he said: "I have rented a property in London, rather than buying one, so I have made no gain from buying a property with help from the taxpayer."

Earlier, the former Commissioner for Standards in Public Life, Sir Alistair Graham, called for Mr Laws to step aside while an investigation was carried out. "I think all of us hoped that after the general election, a line could be drawn, that we would be in a new era of transparency and cleanliness as far as our politics are concerned."

Allies of Mr Laws – including the former Lib Dem leader Lord Ashdown – rallied to their "brilliant" colleague and warned that his removal could damage the UK's chances of an early recovery from financial crisis. Lord Ashdown said Mr Laws should not resign, branding the row a "terrible personal and public tragedy" and warning against a "witch-hunt".

The Lib Dem Foreign minister, Jeremy Browne, said: "If we have a national death wish where we want to pull people down and destroy them personally when they have devoted their life to public service, we are in a state of collective self-harm."

In a statement issued on Friday, Mr Laws said: "Although we were living together, we did not treat each other as spouses. For example, we do not share bank accounts and, indeed, have separate social lives. However, I now accept this was open to interpretation."

The departing minister's statement: 'The longest and toughest two days of my life'

"The last two days have been the longest and certainly the toughest of my life, and I'm very grateful indeed for the strong support which I've received from friends, from family, from colleagues, and also from constituents.

"I'm also extremely grateful to David Cameron, to Nick Clegg and to George Osborne for the strong support they have given me at this difficult time. The support of others is, of course, incredibly important, but, ultimately, I alone have the main responsibility for deciding how to react to recent events.

"I've therefore spoken today to the Prime Minister and to the Deputy Prime Minister to inform them of my decision to stand down from my role as Chief Secretary with immediate effect.

"This is my decision alone and I have reached this difficult decision for three reasons:

"Firstly, I don't see how I can carry out my crucial work on the Budget and spending review while I have to deal with the private and public implications of recent revelations.

"At this important time the Chancellor needs, in my own view, a Chief Secretary who is not distracted by personal troubles. I hardly need say how much I regret having to leave the Treasury and such vital work, which I feel all my life has prepared me for.

"Secondly, while my recent problems were caused by my desire to keep my sexuality secret, the public is entitled to expect politicians to act with a sense of responsibility for our actions. Responsibility cannot simply be for other people.

"I cannot now escape the conclusion that what I have done was in some way wrong, even though I did not gain any financial benefit from keeping my relationship secret in the way that occurred.

"Finally and most importantly, I have an overriding responsibility to those I love most and whom I feel I have exposed to scrutiny in this way. I have pursued a political career because of my sense of public duty, but I have too often put this before the interests of those I love most, and it is time to redress that balance.

"I want to apologise to my constituents for falling below the standards which they are entitled to expect of me. The job of being a constituency MP is no less important to me than my cabinet responsibilities. I shall ensure that I co-operate fully with the Parliamentary Standards Commissioner in the review which I have requested.

"I intend to consider carefully over the period ahead how I can best serve the interests of my Yeovil constituency, which I care about so passionately."

Quotes...

"You are a good and honourable man... I hope that, in time, you will be able to serve again as I think it is absolutely clear that you have a huge amount to offer our country."

David Cameron

"There are questions to be answered about his expenses and that is why he is right to resign. I hope that when these questions are addressed, there will be an opportunity for him to rejoin the Government."

Nick Clegg

"I am very sorry to lose David from the Treasury. It was as if he had been put on earth to do the job that was asked of him. Public life should have a future place for such an honourable, talented person."

Chancellor George Osborne

"He found himself in a bind because he didn't want to reveal his sexuality. It's a bad day for politics if this is the way we judge one of the brightest minds we have.

Lembit Opik, Former Lib Dem MP

"He was ideally suited to the task of restoring health to the public finances. His whole life, in economics, politics and banking had appeared an ideal preparation for this task.

Tim Montgomerie, editor, ConservativeHome

"Having worked with David Laws over the last three years, I am personally very sorry about what has happened. "(Danny Alexander) and the Liberal Democrats now have the chance to take a different course to David Laws and stop the spending cuts this year."

Ed Balls, shadow cabinet minister