Derek Conway, the disgraced Tory MP who sparked outrage by paying his family more than £200,000 of taxpayers' money, has announced he will stand down at the next election.

The MP for Old Bexley and Sidcup bowed to public pressure, after attracting widespread criticism for paying his son an excessive parliamentary salary for work as a researcher.

A statement released by Conservative Central Office said: “I have had tremendous support from my local party, my family and friends but have concluded that it is time to step down.

“I stand by what I have said in relation to the report by the Commissioner of Standards and do not wish to add to those comments at this time.

“Since joining the Conservative Party nearly 40 years ago I have had the privilege of serving in public office since 1974 and have done so to the best of my ability.

“I have advised the Chief Whip and the chairman of my local Conservative Association that I shall not seek to continue as the Conservative Party candidate for Old Bexley and Sidcup at the next election.

Initially, Mr Cameron suggested that a ten-day suspension from the Commons was sufficient punishment for Mr Conway. One day later, the Conservative Party leader had second thoughts after reading the detailed report about the excessive amount that Mr Conway paid his son, Freddie for working as researcher during the university term.

Mr Conway said: “Though not an original supporter of David Cameron for the leadership of my party, I believe that he has shown he has both the ability and the character to be Prime Minister of our country and I do not wish my personal circumstances to be a distraction in any way from the real issues that have to be addressed.”

Mr Conway, who was yesterday stripped of the Tory whip, was found to have “misused” parliamentary funds by paying an annual £11,773 salary, plus bonuses totalling more than £10,000, to his younger son Freddie while he was a full-time student in Newcastle.

The Standards and Privileges Committee found the arrangement was “at the least, an improper use of parliamentary allowances: at worst, it was a serious diversion of public funds”.

MPs will vote tomorrow on its recommendation that Mr Conway should be suspended from the Commons for ten days and required to repay up to £13,161 of the cash.

He also faces a possible police inquiry and fresh investigations into complaints about payments made to his other son, Henry.

Scotland Yard confirmed today that it had received a letter from Duncan Borrowman, the Liberal Democrat challenger for the MP’s Old Bexley and Sidcup seat, asking officers to examine whether a fraud had been committed.

A Metropolitan Police spokesman said: “We can now confirm that we have received the letter. It will take time to look at the contents.”

News of Mr Conway’s decision came as the new head of the public watchdog committee set up to probe MPs’ conduct said they should be subjected to greater checks on how they spend taxpayer-funded allowances.

Sir Christopher Kelly, chairman of the Committee on Standards in Public Life, said: “This case is undoubtedly a very serious breach of parliamentary rules and further undermines public trust in our politicians.

“I understand why there are calls for rules to ban MPs employing members of their families, and indeed, there are international precedents for doing this, and it could be the right thing to do.

“However, it could also seem a rather harsh answer to the problem.

“An alternative approach would be to insist on greater transparency and proper monitoring of existing requirements which is generally better than creating new rules and prohibitions."

He said: “This is certainly an area which needs review. Before deciding on whether this is a task for my Committee, I would want to see what action Parliament itself proposes to take.

“I know that many MPs will share the view that the actions of a few can bring all of them into disrepute."

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