Leader | Race for Speaker begins | The contenders | New rules curb 'flipping' | Cameron advice ignored | Ann Treneman | Daniel Finkelstein | Magnus Linklater

Parliament was forced to surrender its ancient right to run its own affairs on a momentous day in which the Speaker, Michael Martin, paid for the scandal over MPs’ expenses with his job.

The Prime Minister announced that the financial affairs of MPs would be taken over by independent regulators. The Commons Fees Office, which approved the expenses claims that have brought the political system into gross disrepute, will be abolished.

Gordon Brown said that Westminster would no longer operate like a gentlemen’s club, making its own rules, and said that the moves would change centuries of history for Parliament.

MPs’ pay is set by the Senior Salaries Review Body and a new body will police expenses and enforce discipline. The Conservatives and Liberal Democrats are backing the plans in principle.

Mr Brown spoke after Mr Martin became the first Speaker in 300 years to be hounded out of office. In a 33- second speech, he said that he would relinquish the post on June 21 and the Commons would elect his successor the next day. A by-election in his seat of Glasgow North East is expected in July. His fate was sealed on Monday when he made a statement about expenses reform without referring to his own future, and was told directly by several MPs that he should quit.

The astonishing scenes destroyed his authority and by evening he had decided to go. A key moment came when Mr Brown went to see him in his office after the Commons debacle. While not telling him to go, it is believed that the Prime Minister said enough to confirm to Mr Martin that he no longer had his personal backing.

Had Mr Martin not gone he would have faced the humiliation of a Commons motion of no confidence. Even if he had won, enough MPs would have voted against him to make his job untenable.

On another extraordinary day:

• Douglas Hogg, the Conservative MP who claimed for clearing the moat at his country home, became the first MP to announce that he would stand down at the next election. Others seem certain to follow;

• the future of two Labour MPs, Elliot Morley and David Chaytor, who were suspended over mortgage claims, looked bleak as Labour set up a “star chamber” with powers to kick out MPs found guilty of misconduct. Many Labour MPs face inquiries;

• Mr Brown raised strong questions over the future of Margaret Moran, the Labour whip, and Hazel Blears, the Communities Secretary, criticising their expenses claims as unacceptable;

• Alistair Darling, in an interview with The Times, said that every MP had to accept responsability for what had happened. Over the 23 years he had been an MP, the Commons had had many opportunites to change the system but had looked the other way instead, he said. “And we are paying a very, very heavy price for it.”

Mr Martin spoke calmly, delivering the shortest of statements, leaving MPs with the impression that he was deeply hurt by what had happened to him. He said: “I always feel the House is at its best when it is united. In order that unity can be retained I have decided I will relinquish the office of Speaker on Sunday, June 21. This will allow the House to proceed to elect a new Speaker on Monday, 22 June. That is all I have to say in this matter.”

The packed House, surprised by his brevity, remained silent. Normal business then proceeded and MPs queued up to shake the Speaker’s hand. By last night MPs, relieved that he had gone without a showdown, were already absorbed in finding a new Speaker.

Sir Alan Beith, the senior Liberal Democrat, John Bercow, Tory MP for Buckingham, Sir George Young, chairman of the Standards and Privileges Committee, and Sir Alan Haselhurst, a Deputy Speaker, were being mentioned as likely candidates. There was a general expectation that a surprise runner might emerge from the pack.

After announcing his decision to step down, Mr Martin gave details of Mr Brown’s emergency reforms to the expenses system. The reforms include a cap on claims for mortgage interest or rent on second homes at £1,250 a month and a ban on claims for furniture, household goods, cleaning, gardening and stamp duty. MPs will not be allowed to flip their second homes in the year 2009-10 unless there are exceptional circumstances.

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