Now Lords feels heat of the expenses backlash

Inquiry recommends crackdown on outside earnings and allowances

Peers face having allowances slashed and some will be forced to give up lucrative consultancy jobs under plans to radically reform the House of Lords.

The first details to emerge from an independent inquiry into the expenses system in place in the Lords suggest that the second chamber will not escape the fall-out from the expenses scandal, currently engulfing Westminster. A generous over-night allowance handed to all peers who live outside London is expected to be cut as part of reforms being drawn up by the Senior Salaries Review Body (SSRB). It is thought that the body has accelerated its work amid further evidence that some peers had abused the current system.

Peers travelling from outside London to attend the Lords are currently allowed to claim an overnight subsistence allowance of £174 a night. But new rules will see that cut to around £140, with receipts required. Previously, claims had simply been taken on trust. As in the Commons, the recommendations for a reformed Lords system are expected to ban the use of expenses to kit out second homes. It is expected that peers will not be able to claim for mortgage costs on a second home in London but will have to use hotels or rent.

Similar rules are expected to be put in place in the Commons, when Sir Christopher Kelly, chairman of the Committee on Standards in Public Life, publishes his report into MPs' expenses next week. Other reforms expected to emerge from the overhaul include an end to separate office costs and food allow-ances. Currently, peers can claim £75 a day for office costs and another £86.50 for food and taxi bills. However, they are likely to be combined into one, simpler category with the total limit severely cut.

The review board is still finalising its plans, which will be published to coincide with Sir Christopher's announcement on the Commons. However, it will form just part of a stricter regime for members of the House of Lords. They will also be banned from holding lucrative "political consultancy" jobs under plans developed by an inquiry set up in the wake of the "peers for hire" row. Lord Truscott and Lord Taylor were suspended from Parliament for six months after a Lords committee concluded they had been willing to change laws in exchange for money.

Some peers will face further embarrassing revelations over their use of expenses as the inquiry has also proposed the creation of a new anti-sleaze commissioner, with powers to investigate transgressions dating back four years. The inquiry, chaired by Lord Eames, the former Archbishop of Armagh, recommended that any peers with a paid non-parliamentary consultancy be forced to name all the companies that benefit from their advice.

"The phenomenon of 'peers for hire' is not acceptable," Lord Eames said. "Membership of the House of Lords should be a privilege and a duty, not a source of profit."

The new measures have to be put to a vote in the Lords but all parties will be under huge pressure to ensure that they are approved to begin to rebuild public confidence in Westminster and the three main parties welcomed the recommendations.