Ed Balls and Yvette Cooper have been under formal investigation over their expenses for four months, it emerged yesterday. On the day MPs on the Speaker’s Committee outlined a controversial series of reforms to the expenses system, the parliamentary watchdog said that he was investigating the husband and wife Cabinet team over the location of their second home.

John Lyon, the Parliamentary Commissioner for Standards, said that he had accepted a complaint from the Tory MP Malcolm Moss about the couple. It relates to which of their properties the pair claim to be their main home. Between them, the Schools Secretary and the Chief Secretary to the Treasury claimed nearly £32,000 in allowances to fund their London home in 2006-07. This had dropped to £24,000 in 2007-08.

They have another house in Yorkshire, where they have neighbouring constituencies. The Additional Costs Allowance (ACA), under which they have claimed for their London residence, is not to be used for MPs’ primary residence. A spokesman for them said yesterday: “Ed Balls and Yvette Cooper have done everything in accordance with advice from the Fees Office, which has confirmed that they have acted within the rules.”

Yesterday MPs on the Speaker’s Committee said that they were proposing changes that would mark the “end of the gentlemen’s club” in Parliament.

But while MPs will be banned from buying furniture, installing new kitchens or buying televisions on expenses, they will be given a £4,200-a-year subsistence allowance to be claimed without receipts.

Under the favoured option of the committee, the amount of money to reimburse MPs with constituencies outside London will remain broadly the same, with a £19,600 maximum budget for accommodation and £30 a day for each of the 140 sitting days for subsistence. This will leave the overall total at £23,800.

Mortgage interest, utility bills, repairs, insurance, council tax and cleaning can still be claimed as part of the £19,600 so long as receipts are submitted. However redecorationand household goods will no longer be available.

The move is likely to mean little change for MPs who claimed all their second-home allowance under the present system as mortgage interest.

Those hardest hit will be long-serving MPs who no longer have mortgages and will not be able to spend the allowance on renovations to improve the value of their home.

After the ruling by the Information Tribunal and High Court, all the receipts submitted to Parliament will be available for the public to see, with releases taking place every three months.

Parliament is spending close to a million pounds scanning every receipt submitted by MPs as part of their second-home allowance over the summer.

The Members Estimate Committee has recommended tougher independent audits, so that the National Audit Office and an external audit team examine claims relating to at least 20 per cent of MPs each year.

“We recommend that the House extends the scope of the audit engagement so that it is the same for other public bodies,” the report said.

MPs will vote on the proposals on July 3. The committee ruled out suggestions, floated during the review, of merging overnight expenses with salary, nor does it recommend a general per diem rate.

There will also be significant changes for London MPs. The report proposes reducing by half allowances for outer-London MPs - because of complaints that they can claim for ACA despite often living within commuting distance of Westminster. The report said there was a “perverse incentive” for these members to run a second home because they did not receive money otherwise.

Mark Field, the Tory MP for the Cities of London and Westminster, said that the £4,200 subsistence claimable without receipts was unnecessary: “It’s a disgrace. The Speaker’s Committee has created a system which is more of a rip-off. They want to reduce the transparency with the subsistence, no questions asked, no receipts. I think in essence these MPs have stuck two fingers up to the general public.

“It conclusively shows MPs are no longer fit to have a say in this process, either pay or allowances or expenses.” Wendy Alexander’s leadership of the Labour Party in Scotland could hinge on whether three of her most bitter political enemies back a move to ban her from the Scottish Parliament today. It comes after the decision by the standards committee to find her guilty of breaking parliamentary rules by not declaring donations to her leadership campaign.

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