MPs will be barred from claiming expenses for second homes and will be limited to employing no more than one family member, under new rules unveiled today.
The new expenses scheme for the House of Commons drawn up by the Independent Parliamentary Standards Authority (Ipsa) will come into effect immediately after the general election and will allow MPs only to claim for rented accommodation.
MPs will not be eligible for accommodation expenses if any part of their constituency is within 20 miles of Westminster or inside a 60-minute commute by public transport.
This will bar 128 MPs in the London area from claiming.
MPs will also be banned from claiming for first-class rail journeys, said Ipsa chairman Sir Ian Kennedy.
Launching the new system in Westminster today, Sir Ian said the maximum MPs will be allowed to claim for accommodation and constituency office costs each year will be cut from 56,915 to 40,957 for MPs outside the London area and from 40,192 to 26,915 for those in and around the capital.
Sir Ian said: "The new system is fair, workable and transparent. It will enable MPs to carry out the job we ask them to do and will provide reassurance and value for money to the tax-paying public."
Sir Ian's scheme rows back in some respects from last year's review by Sir Christopher Kelly, who recommended a complete ban on employing relatives at taxpayers' expense.
The one-employee limit will cover not only blood relatives and spouses, but also live-in cohabitees and financial partners.
Sir Ian said: "No longer will MPs benefit from a slack allowances system. This system brings MPs' expenses into line with those in most other areas of life.
"Expenses will be reimbursed only for legitimate costs, backed up by receipts."
Sir Ian said the scheme represented a "clear break" with the past.
MPs would only would be paid expenses on the presentation of the proof of payment - "no receipt, no payment".
Budgets for staff and office expenses would be capped, with payments being made only against "agreed and justified expenditure".
Sir Ian said the new rules would be operated "entirely transparently".
"Never again will the public be prevented from seeing how their money is being spent by those who they elect to represent them," he said.
He said that, in future, there will be no second homes for MPs. Non-London MPs will be able to claim for rented accommodation on the basis of a one-bedroom flat.
Mortgage interest on existing second homes will be paid for a transitional period until August 2012 rather than the five years Ipsa initially recommended in its consultation document.
There will be additional support for MPs who care for children under five, who are single parents caring for a child until 21, or are caring for a child or adult in receipt of additional support form the state.
MPs will no longer be able to claim for the costs of cleaning or gardening.
MPs will not be able to claim for the cost of their daily commute to Westminster although they will be able to claim for travel to, from and within their constituency.
Some subsistence payments, for items such as food, will continue but there will be no automatic 25 for every night spent away from the main home.
Instead MPs will be able to claim up to 15 for an evening meal - with a receipt - if the House sits after 7.30pm.
On leaving Parliament, MPs will receive "winding-up costs" for two months but the one-off resettlement allowance will be scrapped.
Sir Ian said he did not regard this as expenses but as part of an MP's remuneration. He said that, if Ipsa was subsequently given responsibility for MPs' pay, it would reconsider the matter.
"It is not our job to punish MPs for past wrongdoings which give the public value for money, allow MPs to do their job and which provide for vigilance against abuse," he said.
"The new rules will be fair, workable and transparent. This is a tough settlement but a fair one."
A Bill currently going through Parliament would create a compliance officer with the power to impose sanctions on MPs who break the rules.
Sir Ian said that, if this measure was not approved, Ipsa would have to rely on referring breaches to the existing Parliamentary Standards Commissioner.
Ipsa's interim chief executive, Andrew McDonald, said the organisation was "on track" to meet its budget of 6.6 million for start-up costs, and would then cost 5.8 million a year to run, compared with the 6.7 million estimated annual cost of the current system.
Overall, the total annual cost of Ipsa, a compliance officer, the expenses scheme and MPs' salaries is expected to be 170.2 million - a saving of 12.3 million on the current 182.5 million.
Senior Labour backbench MP Sir Stuart Bell, a member of the Members Estimate Committee which is responsible for the management of the House of Commons, said: "All MPs returned at the next election will have clarity on what expenses they can claim. There will be a fresh start for a fresh Parliament.
"MPs will live with the new regime in the knowledge that it will have public confidence - and enable them to get on with their job as constituency MPs and MPs working in the national interest through Parliament.
"There will be continuing accountability and transparency so that never again will the Commons be blighted by expenses scandals."
Ipsa had initially proposed a complete ban on MPs employing family members from public funds, and this approach was backed by 59% of the public responding to an online survey.
But documents published today showed that MPs protested vigorously against the move.
Labour's Tom Levitt told Ipsa's consultation: "We are being asked to identify the longest-serving, most loyal, most sympathetic, most flexible members of our staff, who are most likely to work extra hours for nothing - and sack them."
Sally Hammond, who works for her Conservative MP husband Stephen Hammond, wrote: "The job of an MP is not just a job but is a lifestyle, often including the family. The hours are long and we both spend a good deal of time catching up at weekends."
In its submission to the consultation, the Members Estimate Committee said there was no evidence of abuse of the existing arrangements relating to spouses and partners, and that the one recorded instance of abuse involved MP Derek Conway's employment of his son.
Many spouses and partners "work similar long hours to the Member, serving and making themselves available to constituents way beyond what could be expected of any other employee," argued the committee.
Sir Ian said Ipsa had accepted that MPs' wives and husbands provided "good value for money" and there was little evidence that their employment was being exploited by MPs to increase family income.
"We have taken account of opinion expressed across the board," he said. "We heard arguments in favour of the employment of family members on the grounds the provide good value for money. We heard arguments about the possibility of abuse.
"We have weighed those arguments and made those decisions."
He added: "As regards fairness, we could not see why there should not be employment of somebody who was a family member. We were aware that such related parties provided good value for money. We also were aware that there was the possibility in some cases... but there was not evidence of more than a few such cases."
ommons Leader Harriet Harman said: "I welcome today's publication of the Independent Parliamentary Standards Authority's scheme for the future framework and administration of MPs' expenses.
"It puts in place a fully independent, transparent system, which will be subject to robust audit and assurance.
"The public's anger and deep concern over the discredited arrangements of the previous system of expenses is justified and today marks a fresh start and a clean break with the past.
"It reinforces the determined action we have taken already to address the past failings. It will help to restore public confidence through proper scrutiny and regulation of the essential expenses which MPs are entitled to claim to fulfil their duties to their constituents.
"Publication of the Ipsa expenses scheme has been achieved in time for the start of the new Parliament which will follow the general election. This is the result of decisive action taken by the Government last summer by introducing swift legislation to replace the discredited previous regime of allowances.
"Most MPs are decent, hard-working and committed to representing the interests of their constituents in Parliament and I am confident that all of them will give full support to this new system to ensure that it achieves its purpose."
Commons Speaker John Bercow said: "I congratulate the Ipsa board for devising a new scheme in advance of the general election. What is proposed is a massive advance on the old discredited allowances arrangement and I am pleased to see that in many respects what is set out goes well beyond that which Sir Christopher Kelly and his colleagues recommended.
"The swift end to state-sponsored second homes and the overall reduction in total costs which this reformed system entails are very welcome.
"It was my publicly stated view before Ipsa started its work that a complete ban on family members working for MPs, while involving some rough justice for hard-working spouses, would be preferable and that remains my personal opinion.
"Ipsa is, however, independent and it must be allowed the chance to implement the system upon which it has settled in the next Parliament."
Matthew Elliott, chief executive of the TaxPayers' Alliance pressure group, said it was "unbelievable" that MPs were to be allowed to continue employing a family member.
"Ipsa originally proposed a ban, and the consultation backed them overwhelmingly on it, but they seem to have buckled under lobbying from MPs," said Mr Elliott.
"Even if they had restricted the ban to new MPs as a compromise, that would have been a welcome start. This proposal is a serious disappointment, and will do nothing to help the reputation of Ipsa or Parliament."
Mr Elliott said it was "disappointing" that the issue of MPs' resettlement grants - worth up to 65,000 when they leave the Commons - had been "kicked into the long grass".
Sir Ian said he would rule on it only if Ipsa was given responsibility for setting MPs' pay, and declined to say whether he would favour its abolition.