AN unprecedented crackdown on MPs’ expenses was unveiled by outgoing Speaker Michael Martin last night, signalling an end to the moneyspinning free-for-all that has ruined Parliament’s reputation.

The announcement followed an emergency political summit involving leaders of all political parties, where it was agreed something had to be done to restore Parliament’s battered reputation.

Only hours after bowing to political pressure to stand down, Mr Martin announced:

● A cap on claims for mortgage interest or rent on second homes of £1,250 a month;
● Couples must nominate the same main home and will only be able to claim the same as a single person’s accommodation allowance;
● Mortgage claims must be accurate, for interest only and on a continuing loan;
● MPs to be barred from “flipping” their second home for 2009-10, unless an appeal is granted in exceptional cases.
● A crackdown on claims for everyday items, such as furniture or household goods;
● Only rent, hotel accommodation, overnight subsistence, mortgage interest, council tax, utility bills and insurance claims to be permitted;
● New rules to prevent MPs profiting from the sale of homes part subsidised by taxpayers and dodging capital gains tax;
● A registration system for MPs who employ their own relatives;
● A new test of “reasonableness” to block dubious claims and no appeals procedure for expenses that are turned down.

He also pledged that all expenses details would be published online every four months and that an external audit team would examine the past four years of MPs’ expenses.

Mr Martin chaired the talks attended by Gordon Brown and leaders of opposition parties where the interim reforms were agreed.

He told a packed Commons chamber that all parties were committed to accepting the recommendations of Sir Christopher Kelly’s Committee on Standards in Public Life.

The party leaders also endorsed a paper produced by the Prime Minister calling for a fundamental reform of allowances, with regulation by an independent body.

The announcement followed days of controversy over MPs’ expenses and allowances as revelation after revelation emerged in the press.

It came only five hours after Mr Martin announced he was stepping down as Speaker next month as the Westminster expenses scandal claimed its biggest scalp.

In an emergency statement, Mr Martin said he would relinquish his post on Sunday, June 21, so that a new Speaker could be elected on June 22.

His shock move came only a day after he faced unprecedented challenges to his authority in the chamber and a motion of no confidence in his handling of the expenses row was tabled by Tory Douglas Carswell.

It is the first time a Speaker has effectively been forced from office since Sir John Trevor was found guilty by the House of a “high crime and misdemeanour” for accepting a bribe in 1695.

The Speaker had faced mounting criticism for overseeing the system that apparently encouraged MPs to fiddle their expenses – while fighting to prevent the release of the receipts that proved a scandal had taken place.

His reaction to the leak of the receipts was to call in the police, rather than apologise to the country. Mr Martin was also dogged by allegations about his own lavish expenses.

At Westminster, it was reported that Gordon Brown secretly visited Mr Martin in his grace-and-favour apartment late on Monday, suggesting the Prime Minister may have told him it was time to go.

At a meeting of Labour MPs on Monday evening, the Prime Minister was warned that he would be dragged even deeper into the expenses scandal unless he cut the besieged Speaker loose.

However, Mr Martin’s resignation – he will also quit Parliament and probably enter the Lords – means a perilous by-election for the Prime Minister next month in his oncesafe Glasgow North-East constituency.

Mr Martin won the seat with a 10,000 majority over the Scottish National Party at the 2005 election, but in the current turmoil, no Labour seat is safe. Anti-sleaze candidates are likely to stand. Meanwhile, attention quickly switched to who will succeed the Speaker in an election to be held on June 22 – using a secret ballot for the first time.

Ladbrokes quickly installed serving deputy Speaker Sir Alan Haselhurst and former Labour minister Frank Field as joint favourites, followed by Conservatives Sir George Young and John Bercow.

Ann Widdecombe, a wellknown Tory figure, declined to rule herself out – saying it was too early to start “jockeying for position” – and Liberal Democrat Sir Alan Beith, the Berwick MP, put himself firmly in the race.

Candidates must be nominated by at least 12 MPs and will all address the Commons, before successive rounds of voting until one has the support of more than 50 per cent of MPs.

Addressing a packed Commons at 2.30pm, Mr Martin said: “Since I came to this House 30 years ago, I have always felt that the House is at its best when it is united.

“In order that unity can be maintained, I have decided that I will relinquish the office of Speaker on Sunday, June 21. This will allow the House to proceed to elect a new Speaker on Monday, June 22.

That is all I have to say on this matter.”

By quitting Parliament next month, Mr Martin will miss out on an allowance worth nearly £65,000 available to MPs who leave the Commons at a General Election.

His authority was fatally weakened when, after an earlier statement on Monday, MPs lined up to tell him he was part of the problem. A vote on a motion of no confidence was inevitable at some stage.

Some Labour MPs protested at class-based snobbery directed at a Glaswegian sheet metal worker and that he was being made a scapegoat for scandals involving other MPs.

But many more recognised he had acted as the “shop steward of the Commons”, instead of offering the leadership both reform-minded MPs and the public were calling for.

In another dramatic move yesterday, the Committee on Standards and Privileges announced that it had authorised parliamentary standards commissioner John Lyon to hold inquiries into Labour MPs David Chaytor and Elliot Morley – who both claimed expenses against mortgages which had already been paid off.

However, the probes will not be launched until after Scotland Yard has decided whether to open a criminal investigation.

Both MPs referred themselves to the commissioner after allegations about their claims surfaced.