Sir Christopher Kelly today accused MPs of exploiting their allowances for personal gain, as he opened his long-awaited inquiry into Commons expenses.

The chairman of the Committee on Standards in Public Life said that MPs appeared to lack principles, when they should have shown honesty and integrity.

"These values are timeless," he said, at the start of the committee's first evidence session. "If they had been followed more by more MPs over the past few years we would not be in the situation that we are."

The first person to give evidence was Harriet Harman, the Leader of the Commons. She said that she felt it was time to end the practice of MPs employing members of their own family in their offices, as the public did not believe it was fair.

She said that relatives often actually worked harder than normal employees, as they lived the job, but added: “I think my own view is that it is just too difficult to sustain public confidence.”

Ms Harman was asked why disgraced MPs who decided to step down early still receive generous resettlement grants to help them assimilate back into private life.

Lloyd Clarke, a standards committee member, pointed out that employees in the private sector did not get redundancy pay-offs when they decided to resign.

Ms Harman replied that the Commons committee that oversees such grants had decided not to abolish them, when it last considered the issue in 2008, because it did not want such MPs to have a perverse incentive to try to hang on in their jobs without resigning or retiring.

Ms Harman said as a result of the recent controversy she had asked the Commons Members Estimate Committee to have another look at the grants, which can be up to a full year’s salary, with the first £30,000 tax-free.

Asked why the Government hadn't made the change in its interim reforms, she threw the issue back to the standards committee, insisting: “We have asked for your recommendations on that.”

She reassured the committee that as MPs have no contract of employment with the House of Commons that covered any of their allowances, there would be no legal problem with denying the cash to people who had already said they were stepping down voluntarily.

Sir Christopher asked Ms Harman what she thought of the idea of housing MPs in a "barracks” in London, possibly at the Olympic village being built for the 2012 Games - a solution that is popular with the public.

Ms Harman said that was “obviously something for the committee to consider”, but added that it could prevent MPs having a family life.

The families of many MPs - including the Tory leader David Cameron - live with them in London during the week, then commute with them to constituencies at weekends.

“It does have to be recognised that we do not want a parliament that is exclusively made up of people who are prepared to set their family life entirely on one side,” she said.

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