Britain's Treasurer quits in gay 'expenses' scandal

Britain's 18-day-old coalition looked fragile last night as the Chief Secretary to the Treasury, David Laws, resigned over expenses claims paid to his partner.

Mr Laws, who friends said was "terrified" of being outed as gay, quit after it was revealed he claimed £40,000 in public money for rent paid to his long-term partner in apparent breach of House of Commons rules.

The resignation of the man charged with slashing the nation's £156bn deficit is a major blow to the fragile coalition government formed by David Cameron and Nick Clegg less than three weeks ago. Mr Laws, in an emotional statement at the Treasury last night, said the past two days had been "the most difficult of my life".

Downing Street was struggling to avert a full-blown crisis last night by attempting to reassure the public that the Government was dealing with the economy. The Lib Dem Danny Alexander was appointed to replace Mr Laws.

The revelation over "secret" expenses arrangements came on the day the Prime Minister announced he was extending transparency to help to "rebuild trust in our politics".

Mr Laws had emerged as a key figure in the new government, after he helped to negotiate the terms of the Conservative-Liberal Democrat coalition. But his position was undermined yesterday, when The Daily Telegraph published details of the rent he had paid to James Lundie, his partner since 2001.

Mr Laws claimed up to £950 a month for eight years to rent a room in two properties owned by Mr Lundie. But, since 2006, parliamentary rules have banned MPs from "leasing accommodation from a partner".

For fear that changing the arrangement would "out" him as gay, the MP did not change the arrangement.

He said he had not considered himself to be in breach of the rules which in 2009 defined partner as "one of a couple ... who although not married to each other or civil partners are living together and treat each other as spouses".

In an interview with The Times, carried out last Thursday, Mr Laws had said he was single. But, after details of his relationship emerged, he told the newspaper that many people - including some of his own friends - did not accept homosexuality when he was growing up.

He later told the newspaper: "I have kept this secret from everyone I know for every day of my life."

Yesterday there were feverish negotiations at the heart of the governing coalition over whether he could remain in such a crucial financial position while he was being investigated over his own expenses. His predicament was not helped by the lack of public support from his own party leader, Deputy Prime Minister Nick Clegg, who fought his election campaign on a platform of replacing "old politics" with a newer, cleaner agenda.

No. 10 Downing St insiders said officials and ministers on both sides of the coalition were upset by the revelations.

The Prime Minister and Mr Clegg held crisis talks on Friday afternoon after The Daily Telegraph informed Mr Laws of its revelations about his expenses claims.

On Friday evening, Mr Laws referred himself to the parliamentary Standards Commissioner and promised to repay the money. But amid the growing storm, Mr Laws was said to be "emotionally shattered" and by yesterday morning was ready to stand down.

Mr Laws had been handed the key task of piloting a huge cuts programme, starting with £6.2bn savings announced jointly with Chancellor George Osborne last week.

Shortly after 10.30am on Friday, The Daily Telegraph contacted the Treasury with a faxed letter informing them of their claims. By late morning, No 10 officials were informed and Mr Cameron, who was giving a speech in Leeds, spoke to Mr Clegg by telephone for crisis talks. They agreed that Mr Laws would refer himself to the Standards Commissioner.

Meetings involving senior Lib Dem and Tory officials at Downing Street went on late into Friday evening.

Mr Cameron issued a statement on Friday evening saying he accepted that Mr Laws had referred himself to the authorities.

Yesterday morning, Mr Laws was believed to be with friends at a safe house in the South-west. He did not turn up for his regular constituency surgery in Yeovil and was not at his country cottage home in Chard in Somerset.

Mr Laws had consistently boasted of his expenses record for several months, pointing to a "dramatic underspend" on his London living costs. At the height of the expenses scandal last year, he said: "I have rented a property in London, rather than buying one, so I have made no gain from buying a property with help from the taxpayer."

Earlier, the former Commissioner for Standards in Public Life, Sir Alistair Graham, called for Mr Laws to step aside while an investigation was carried out. "I think all of us hoped that after the general election, a line could be drawn ... that we would be in a new era of transparency and cleanliness as far as our politics are concerned. Now there's a bit of a question mark."

The Labour MP John Mann, a long-term critic of expenses abuse, joined the condemnation, saying Mr Laws' position in government was "untenable".

"Nick Clegg was meant to have carried out an audit of his MPs in the last parliament," Mr Mann said. "These things should have been out in the open in the last parliament."

The criticism came as allies of Mr Laws - including the former Lib Dem leader Lord Ashdown - rallied to their "brilliant" colleague and warned that his removal could damage the UK's chances of an early recovery from financial crisis.

Lord Ashdown said Mr Laws should not resign, branding the row a "terrible personal and public tragedy" and warning against a "witch hunt".

He added: "He represents the very best in our politics, and ... we should all be careful about taking that down in the manner in which this public witch hunt is in danger of doing."

The Lib Dem Foreign minister Jeremy Browne attempted to shift the focus of the row, insisting it was "a human story ... not a financial story".

Mr Browne said: "We have somebody, one of the most talented, brilliant politicians of his generation in the Treasury trying to get our national finances back on their feet.

"If we have a national death wish where we want to pull people down and destroy them personally when they have devoted their life to public service, we are in a state of collective self-harm."

In a statement issued on Friday, Mr Laws said: "Although we were living together, we did not treat each other as spouses. For example, we do not share bank accounts and, indeed, have separate social lives. However, I now accept this was open to interpretation."

- INDEPENDENT