Laws claimed £40,000 to rent rooms from partner

David Laws was embroiled in a damaging row over his expenses last night after it emerged that he had handed his long-term partner tens of thousands of pounds of taxpayers' money.

The Chief Secretary to the Treasury, who won rave reviews from both Tories and Liberal Democrats for his performance this week during the announcement of significant public spending cuts, now faces an investigation into his actions and a fight to keep his job after admitting claiming £40,000 to rent a room in two houses owned by his partner.

Mr Laws apologised and said that he will pay back the money claimed between 2006 and 2009. He has also voluntarily referred his case to Parliamentary Commissioner for Standards, John Lyon. Last night, the Prime Minister David Cameron agreed that he had done the right thing.

The news follows just days after Mr Laws, a Liberal Democrat MP, said his public spending plans would send "shockwaves" through Whitehall.

In a statement Mr Laws said he was in a relationship with the owner of the properties, James Lundie, who works for a lobbying firm. "James and I are intensely private people," he said. "We made the decision to keep our relationship private and believed that was our right. Clearly that cannot now remain the case. My motivation throughout has not been to maximise profit but to simply protect our privacy, and my wish not to reveal my sexuality." He said that though the relationship had begun in 2001, it had been "unknown to both family and friends throughout that time".

The revelations over Mr Laws' expenses represent the first major setback for the coalition Government. He had been pivotal in negotiating the agreement between the two parties and was entrusted with defending the £6.2bn of public spending cuts that were announced this week.

According to The Daily Telegraph, the Yeovil MP claimed between £700 and £950 a month to sub-let a property in Kennington, south London, between 2004 and 2007. Mr Lundie owned the flat and lived there with Mr Laws, selling it on for a profit of £193,000 in 2007. After that, Mr Laws then began to rent a "second bedroom" in another property bought by Mr Lundie, with his monthly claim increasing to £920 a month. Mr Laws' main home is in his constituency.

Strict rules introduced in 2006 forbid MPs from renting a property from a partner. Mr Laws, who is a millionaire in his own right following a career in banking, said: "At no point did I consider myself 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.' 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. I regret this situation deeply, accept that I should not have claimed my expenses in this way and apologise fully." Mr Cameron has previously taken a tough line on expenses issues. However, under the coalition agreement, he needs Nick Clegg's permission to sack Mr Laws.

Factfile

*David Laws was born in 1965 and brought up in Weybridge, Surrey.

*He went to an independent Catholic school before going to Cambridge University, where he graduated with a double first in economics.

*He began his career as an investment banker with JP Morgan, and by his late twenties was managing sterling for Barclays de Zoete Wedd. He was a millionaire by the age of 28.

*In 1994 he quit finance to become an economics adviser to the Lib Dems.

Seven years later he succeeded Paddy Ashdown as MP for Yeovil.

*He held a series of posts during the Lib Dems' period in opposition, including work and pensions spokesman.