MPs were challenged last night to break their centuries-old tradition of self-governance and submit their use of public money to checks from an outside body.

Sir Christopher Kelly, the standards watchdog, said there was a case for a ban on MPs hiring family members as he intervened in the row over payments by the Tory MP, Derek Conway, to his sons.

He said the Commons had to at least introduce more transparent rules and a system of checks on how MPs spent their £144,927 allowances and expenses, excluding travel. If MPs themselves failed to do so, he said his Committee on Standards in Public Life would conduct its own review and publish recommendations for the reform of Commons allowances.

His intervention amounted to his first big test since taking up the role this month and hinted that he was prepared to take on some of MPs’ most jealously guarded privileges.

But MPs gave every indication that they were prepared to ignore Sir Christopher’s demands.

Michael Martin, the Commons Speaker, has so far allied with Commons traditionalists to resist calls for tighter rules and outside checks on MPs’ expenses claims, which many MPs see as an attack on their system of parliamentary privilege.

Mr Martin is believed at Westminster to have been the prime mover in blocking a recommendation by the Senior Salaries Review Body, which makes proposals for MPs’ pay, to introduce random checks on MPs’ expenses claims.

The review body proposed spot checks on the claims of between 30 and 60 MPs every year to ensure they were not abusing the system and said inspections should be by the National Audit Office, not by Commons officials.

The plan was in effect kicked into the long grass last week when the Commons approved a motion referring it a committee of senior MPs, chaired by the Speaker, for “further consultation”.

It will consult an advisory panel of MPs, appointed by the Speaker. Similar decisions were also taken on a series of other proposals, including a tightening of rules to require MPs to submit receipts for all expenses claims above a threshold of £50 a month. The current ceiling is £250 per item or claim.

The Lib Dems have broken ranks by demanding the immediate introduction of such spot checks plus the publication of full lists of each MPs’ staff to disclose how many employed members of their family.

Conservative sources said last night that there was a growing realisation among senior party figures that greater transparency was required in the rules for MPs’ expenses after the furious public reaction to Mr Conway’s payments to his two sons.

Theresa May, the Shadow Leader of the Commons, told The Times: “There should be greater auditing of MPs’ claims. Whether the National Audit Office is the right body to do it I think could be up for discussion, but something should be done in this area.”

Harriet Harman, the Leader of the Commons, last week endorsed the plan to refer changes to expenses to a panel of backbenchers as part of a concerted move by the Government to persuade MPs to back a staged pay rise worth 1.9 per cent, rather than accept the full 2.56 per cent pay rise recommended by their review body.

John Spellar, the Labour MP appointed to chair the panel, refused to say whether he would support the recommendation for spot checks by external auditors. He told The Times: “I am not going to give a view before we have looked at the subject. It would be odd of me as chairman to be starting to give judgments and decisions before the committee has even met.” MPs will also seek to prevent greater detail about their expenses being made public at a tribunal hearing next week. The Commons Commission is appealing against a decision by the Information Commissioner ordering them to disclose a detailed breakdown of the £22,110-a-year allowance for MPs outside London to fund and furnish second homes.

This follows a freedom of information request by Heather Brooke, an FOI campaigner, asking for the release of a list of how the money is spent. Richard Thomas, the Information Commissioner, refused this level of detail, arguing it would compromise MPs privacy, but suggested they should disclose information under 12 more general headings.

Parliamentary authorities argue that MPs were told in 2002 that this information would not be disclosed and that any change would be unfair. They claim there is no distinction between professional expenses arising out of public office and personal expenses, and that the activities of individual MPs “are not themselves public authorities”.

The pressures for reform

Proposal To increase staffing budgets from £90,505 to up to £102,650 a year
From Senior salaries review body
Response Accepted and voted through by MPs last week

Proposal Spot checks on expenses claims for 30 to 60 MPs a year by National Audit Office
From Senior salaries review body
Response Kicked into the long grass – referred to a panel of MPs appointed by Michael Martin

Proposal That receipts be required for all expense claims from MPs above £50 a month. The current threshold is £250
From Senior salaries review body
Response Kicked into the long grass – referred to a panel of MPs appointed by Michael Martin

Proposal More open recruiting methods for MPs’ staff
From Sir Alistair Graham, ex-standards watchdog
Response Silence

Proposal That MPs should publish details of all staff including family members
From Liberal Democrats
Response Silence

Proposal Request for breakdown of how each MP spends their housing allowance of £22,110
From Freedom of Information campaigners
Response Committee chaired by Michael Martin is fighting against disclosure at tribunal

Times Recommends

• An officer and a gentle woman
• Dame Helen Mirren is worthy of the Epidaurus
• Foods that can help to prevent swine flu