Shahid Malik, the Justice Minister exposed as the biggest expenses claimant of all MPs, was forced to step down today to await the outcome of an inquiry into his living costs.

Downing Street said that Gordon Brown asked Sir Philip Mawer, the Prime Minister’s independent adviser on ministers’ interests, to investigate whether Mr Malik’s alleged benefit of a subsidised rent breached the ministerial code.

The announcement by No 10 came as it emerged that a panel of senior Scotland Yard officers and prosecutors will meet next week to decide what action to take over claims MPs misused expenses. Officials will assess whether criminal inquiries are necessary in the aftermath of the scandal.

Mr Malik's resignation came minutes after the Labour MP for Dewsbury had refused to apologise, offering instead to donate the cost of his 40ins flat-screen television to a local charity.

He said that his second-home allowance of £66,827 over three years was “one million per cent by the book” and insisted that he would not return any of the money to the taxpayer

Mr Malik’s abrupt departure took Westminster by surprise because he did not appear to have been in breach of the expenses rules. However, the revelation that he was paying rent of less than £100 a week seems to have been his downfall. It appears to be a benefit in kind that he should have declared.

Downing Street’s announcement is another sign that party leaders are determined to be tough over MPs caught up in the expenses scandal. David Cameron required the resignation of Andrew Mackay, his political adviser, yesterday and Mr Brown suspended Elliot Morley from the PLP.

Mr Malik was able to claim thousands of pounds to refurbish his house in Peckham, southeast London, because he said it was his second home. He claimed that a three-bedroom house in his constituency, for which he paid £100 a week in rent, was his primary residence. “I spend half the week in Dewsbury and half the week in London,” he said.

The junior minister was reported to have been paying less than the market rate for his home in his West Yorkshire constituency after securing a discount from Tahir Zaman, a local businessman.

In 2005 Mr Zaman admitted letting a house to a family despite a council order classifying the building as uninhabitable, and was fined £450 and ordered to pay £200 costs.

Since being elected in 2005, Mr Malik has claimed the maximum amount allowable for a second home. Last year he claimed £23,083 for the house in London. His second-home claims were said to include £2,600 for a home cinema system, which was cut in half by the Commons Fees Office, and £730 for a massage chair.

He is also alleged to have claimed £65 in respect of non-payment of council tax.

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