Politicians who cash in on lucrative directorships in the private sector could receive lower salaries than MPs with no outside interests under reforms being planned by Whitehall’s pay watchdog.

The Senior Salaries Review Body is to conduct a full review of Commons pay which is expected to examine whether MPs with second jobs should face a financial penalty.

The move comes as politicians were last week forced to publish figures detailing exactly how much they get paid for outside interests and the amount of time they devote to them each month.

The normally discreet pay watchdog expressed its alarm about MPs’ directorships and consultancies in its written submission to the expenses investigation being conducted by Sir Christopher Kelly, chairman of the committee on standards in public life.

“We can see that in principle there is an argument that someone who does not work full-time as an MP because of other paid activities should not receive the full salary,” said the salaries review body.

MPs are paid a basic salary of £64,766, irrespective of how many hours they dedicate each week to second jobs.

If the review body decides to reform the system, MPs could have their salaries cut in proportion to the amount of time they spend on their directorships, losing up to two thirds of their salary.

For some MPs, particularly former Labour and Conservative ministers, who spend a sizeable proportion of their week advising private companies, this could mean a large reduction in their basic Westminster salary.

The review body pointed out that members of the Scottish parliament or Northern Ireland assembly with second jobs already have to sacrifice some of their pay.

An review body source confirmed that the watchdog would start a full inquiry into MPs’ pay immediately after the general election, which is expected next spring.

Second jobs have become a big issue among MPs since Gordon Brown forced through reforms requiring greater disclosure of outside earnings since July 1.

The move was designed to embarrass members of the Conservative front bench, many of whom have lucrative sidelines advising City firms.

David Cameron, the Tory leader, has recently ordered his shadow cabinet colleagues to quit all second jobs by the end of the year.

However, the new register of members’ interests published last week discloses exactly how much some Tories are still being paid.

For example, Oliver Letwin, the Conservative policy chief, reveals he works eight hours a week for Rothschild & Sons investment bank at £145 an hour.

The new regulations will also force former Labour ministers who have cashed in on their government experience to reveal their earnings. Some, such as Alan Milburn, the former health secretary, are paid more than £100,000 a year for corporate advisory work on top of their basic MP’s salary.

The latest register of members’ interests also reveals some oddities such as Gisela Stuart, the former Labour minister, who earned £2,000 for 16 hours spent editing The House Magazine, a political periodical.

Jimmy Hood, the Labour MP for Lanark and Hamilton East, received a monthly payment of £625 for his role as parliamentary consultant to Scottish Coal. He declared: “Hours worked nil.”

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