MPs have accused the three main party leaders of inflicting further damage on Parliament's image by competing with each other to look "toughest of all" in cracking down on expenses.
Senior politicians fear "breast-beating" between Gordon Brown, David Cameron and Nick Clegg, as they try to show voters their parties are cleaning up their act, will backfire by reminding the public about the abuse of the expenses system. Mr Clegg, the Liberal Democrat leader, angered many MPs yesterday by calling on Sir Thomas Legg, the former civil servant conducting an independent audit of all MPs' claims, to widen his inquiry to include the "flipping" of first and second homes and avoidance of capital gains tax.
And one senior Tory MP said: "People are steamed up about the way David [Cameron] has handled this. The leaders have inflicted collective harm on the whole system. This is the moment when we should be moving on, not going over the old ground."
Martin Salter, a Labour Party vice-chairman, said: "This review appears to be riddled with flaws and is clearly ill thought-out, missing the main picture which is concern about property speculation rather than cleaners' wages. This is the price of the party leaders indulging in an arms race to appear as draconian as possible."
Leadership sources in all three parties insisted their tough line was necessary to reassure voters that the system was being reformed. They claimed the backbench rebellion was fizzling out after no MP dared to raise expenses at the first session of Prime Minister's Questions since the summer recess.
However, Alan Simpson, a left-wing Labour MP, suggested that Sir Thomas's decision to impose retrospective limits on claims for cleaning and gardening would be challenged in the courts.
Another Labour MP, ordered by Sir Thomas to pay back £16,000, is consulting lawyers and says he cannot afford to repay. Several MPs believe the retrospective demands breach the European Convention on Human Rights.
It emerged that the Commons Speaker, John Bercow, pleaded with Sir Thomas not to impose ceilings retrospectively but that he stood firm, perhaps fearing that he would be accused of a whitewash. Harriet Harman, the Commons leader, said the expenses affair would not be "sorted out by a competition between the political leaders".
Jacqui Smith, the former Home Secretary who apologised on Monday for claiming that her sister's home in London was her main home, has been told by Sir Thomas to pay back £1,500. She has accepted she must return almost £1,000 for cleaning bills but is disputing the rest of the demand, saying it includes a barbecue she never purchased.
Meanwhile, Eleanor Laing, a Tory front bench spokesman on justice, repaid £25,000 yesterday after avoiding a £180,000 capital gains tax bill – the biggest payback since the Legg inquiry began – even though she was cleared of any wrongdoing by it.
She avoided a £180,000 capital gains tax bill on the sale of two flats by telling tax authorities they were her principal residence, when they were designated her second home for expenses.