The practice of MPs employing members of their families was under question last night after David Cameron withdrew the Tory whip from Derek Conway and tried to prevent his party from being tainted by sleaze.

A day after suggesting that a proposed ten-day suspension from the Commons was sufficient punishment for Mr Conway, Mr Cameron had second thoughts after reading the detailed report about the excessive amount that Mr Conway paid his son, Freddie, for working as a researcher.

The report from the Commons Standards and Privileges Committee included references to Mr Conway’s elder son, Henry, being employed in a similar capacity. By yesterday morning that had become the subject of a second complaint to the parliamentary authorities. The Metropolitan Police were also urged to investigate the whole affair.

Mr Cameron told Patrick McLoughlin, the Opposition Chief Whip, to ask a number of questions of Mr Conway. A lengthy conversation ensued, Mr McLoughlin reported back and Mr Cameron, unimpressed with the explanation, decided to withdraw the whip from Mr Conway immediately.

Mr Cameron said: “The usual procedure in these cases is to leave the punishment to the House of Commons authorities. However, having asked the Chief Whip to speak again to Mr Conway and having personally reflected overnight, I have decided to withdraw the Conservative whip.”

Mr Cameron acted after criticism from within his party and from outside that he had failed to act straight away against Mr Conway. His most regular charge at present against Gordon Brown is that he is a ditherer and Labour MPs are clearly ready to throw that back at him at every opportunity.

The Tory leader said that he had decided to withdraw the whip to make clear that Mr Conway’s behaviour was unacceptable.

Mr Conway was reprimanded after the Parliamentary Commissioner of Standards concluded that his son, Freddie, had not fully earned the £40,000 that he had been paid for his three-year employment as his father’s research assistant. The committee proposed that Mr Conway should return £13,161 of the amount paid to his son. His older son, Henry, is believed to have been paid about £32,000 in total from Mr Conway’s staffing allowance while he was a university student.

The episode has dismayed Conservative MPs because, although a string of Labour figures are in the dock over party donations, Mr Conway’s case involves public money. One Conservative MP told The Times: “Labour have been looking for the chance to say ‘same old Tories, same old sleaze’ and they have now been given it.”

An inquiry into the practice by MPs of employing members of their family was demanded by Sir Alistair Graham, the former standards watchdog, who said that the present system was sloppy and demeaned politics. He said: “There needs to be a root-and-branch review. Some of the arrangements are very, very sloppy. There is not the monitoring and rigour that other public servants would be subjected to.”

He urged his successor, Sir Christopher Kelly, to begin such a review. “I have always thought the use of family members to support a Member of Parliament gives a perception that the arrangements were more about boosting family income than about arrangements to support Members of Parliament,” he said.

Andrew Tyrie, Tory MP for Chichester and a member of the Conservative Democracy Taskforce, suggested that MPs should in future be barred from employing relatives. “Although every relative working in the Commons I know does so very conscientiously, the time may have come for a US-style bar or, at least, much greater transparency.”

Mr Conway’s career appears to be in ruins. He cannot be reselected as a Tory candidate while he does not have the whip. Although Mr Cameron did not rule out restoring the whip in time for the general election, expected next year, he said that Mr Conway had “an awful lot of road to make up” if he were to return to the party fold.

One of the Conservative Party’s biggest donors, the businessman Stuart Wheeler, described the allegations against Mr Conway as shocking and giving a “bad impression of politics”.

A loyal front, however, was being maintained in Mr Conway’s constituency of Old Bexley and Sidcup, which he has shored up as a Tory stronghold since Ted Heath’s retirement in 2001.

Marie Cavey, who resigned recently as president of Bexley Conservatives Ladies’ Luncheon Club, said: “I feel very, very sorry for him. I hope he’ll bounce back. He’s a jolly good Member as far as we are concerned.”

She said she believed that the committee’s damning verdict had been inspired by a campaign by the Labour Party. The police had no grounds to investigate him, she added.

Tories who had a more distant relationship with Mr Conway were shocked. Shirley Vick, chairman of the Conservative Association in nearby Erith and Thamesmead, which is also in the constituency, said that the MP’s conduct would make people even more cynical about politicians than they already were.

Bane of his leaders

— A political street-fighter from the North East who wears pinstriped suits and takes pride that he was educated at a technical college but sent his own sons to Harrow, Derek Conway is the embodiment of a working-class Tory

— After fighting two unwinnable seats in the general elections of 1974 (Durham) and 1979 (Newcastle East) he was elected MP for Shrewsbury and Atcham in 1983 and rose to become a whip

— Swept out of his seat in 1997, he was not too proud, nor too wealthy, to take a job as the chief executive of the Cats Protection League before coming back in 2001 as MP for Edward Heath’s old seat of Old Bexley and Sidcup

— He has been trouble for every Conservative leader since. Iain Duncan Smith, an enemy from Maastricht days, was the first to rue his return. Mr Conway seized on Mr Duncan Smith’s difficulties when he was accused (wrongly, it transpired) of misusing an allowance to pay for his wife, Betsy

— In the event it was Michael Howard, not David Davis — Mr Conway’s close political ally — who benefited from the coup organised by Mr Conway and others. When in the summer of 2004 his name was included in a list of so-called “bed-blockers” — older Tory MPs the then Chief Whip was allegedly encouraging to resign — Mr Conway showed again why he was not a man to be trifled with

— Pointing at modernisers such as David Cameron and George Osborne around Mr Howard, he said: “This is what we call the Notting Hill set. They sit around in curious little bistros in parts of London, drink themselves silly and wish they were doing what the rest of us were going on with”

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