To enable MPs to do their work representing their constituents effectively, there needs to be an allowance system. The public are entitled to be confident that that the allowance regime is fair and reasonable and effectively enforced.

The Prime Minister has asked Sir Christopher Kelly and the Committee on Standards in Public Life to look at all of the relevant issues involved in MPs' allowances as speedily as possible.

In the meantime the Government thinks it is right to bring forward reforms that can be enacted sooner. We will therefore be asking the House of Commons to support the following proposals, which will reduce the cost to the taxpayer:

A. Flat-rate Allowance. We propose that, for MPs representing constituencies outside London, the Personal Additional Accommodation Expenditure (commonly known as the ‘second home’ allowance) should be abolished and be replaced by a flat-rate daily allowance, based on actual attendance at Westminster on parliamentary and Government business or the business of the Opposition Front Benches. This will be limited to the Parliamentary Session or a maximum number of days.

There will now be no second home allowance or claims for food, furniture and fittings, fuel, mortgage interest, rent or council tax.

We will ask the Senior Salaries Review Body to set the appropriate level of allowance independently, comparable to those set by wider public and private institutions. The Committee on Standards in Public Life will want to consider these issues going forward, including the issue of taxation. Provision will be made for the long-term ill and maternity leave. The claims by each Member should be published annually.

B. London. For anyone representing constituencies within reasonable distance of Westminster, the Personal Additional Accommodation Expenditure will be replaced by the London supplement, which already applies to inner London MPs. The Committee on Standards in Public Life will of course want to look at the current Green Book rules on this and the SSRB should report on the level of the allowance.

C. Grace and Favour homes. Ministers who for security or other reasons live in so-called ‘grace and favour’ homes will continue to pay council tax and tax on the benefit of living in this accommodation but will not receive this new allowance. The Committee on Standards in Public Life should be asked to report on these arrangements.

D. MPs’ Staff. In future all staff appointed by MPs without exception should become direct employees of the House of Commons, which would become centrally responsible for their employment terms and conditions, their contracts, and the payment of their salaries within the limit allowed—and will have the right to make an independent assessment of such contracts. The Committee on Standards in Public Life is examining the rules governing employment of spouses or other relatives.

E. Full receipts. There will be a requirement for receipts for claims for all remaining transactions (for office costs, travel, and communications), including those under £25. MPs’ claims will be subject to independent audit by the National Audit Office.

F. Transparency of MPs’ Second Incomes. The Prime Minister has already asked the Committee on Standards in Public Life to look into the issue of MPs and second jobs, in order to avoid conflicts of interest and to reflect the fact that MPs receive a parliamentary salary for a full-time job. Meanwhile, there should be greater transparency.

This Government have been the first to publish a list of Ministers’ interests.

Where Members of Parliament have a second source of income from second jobs, irrespective of whether it is in their capacity as an MP, every payment shall be declared with a full description of who paid and what for. There shall also be a full declaration of the hours worked for the payment received.

G. Pensions. We have taken steps through the SSRB to reform MPs’ pension arrangements. In the meantime, in order to contain the cost to the public purse, a proposal will be put before Parliament to increase the contribution required from MPs by around £60 per month for the current year and to extend the scheme’s pension limit of two thirds of final salary to all scheme members for future service.

H. We will ask the Committee on Standards in Public Life to look at the circumstances applying in Northern Ireland before final application of the flat rate allowance for MPs representing Northern Ireland.

I hope that with the support of the whole House we could implement the majority of these proposals in time for 1 July. My right hon. Friend the Prime Minister has offered to meet with the leaders of the main Opposition parties to discuss them. The Committee on Standards in Public Life will report their views in due course, which of course we will consider seriously, but we should implement as many interim changes as possible without delay.