McLeish quits over 'muddle' on expenses

Henry McLeish, Scotland's First Minister, resigned yesterday, plunging the country into its second leadership crisis within 13 months.

Mr McLeish, 52, was forced to quit after accusations of incompetence, surrounding the handling of his constituency finances, culminated in a motion of no-confidence against him by opposition parties.

His decision to step down was understood to have been triggered by the prospect of yet more revelations about the sub-letting of his constituency office while he was an MP.

Mr McLeish revealed on Tuesday that he had failed to declare some £36,000 received from renting out the office, but yesterday morning it was revealed he had not disclosed that he had also earned income in rent from a charity.

His resignation, after 14 years in the Westminster and Edinburgh parliaments, came at the beginning of a debate in which he had been expected to make a speech to the Scottish assembly about the issue during a Tory-led debate.

Instead, at 11am, Tom McCabe, the Scottish Minister for Parliament, informed the chamber that Mr McLeish intented to stand down. Although there is no doubt Mr Mcleish would have won a no-confidence debate, there were fears that he would have been left a lame-duck leader ahead of the crucial Scottish parliamentary elections in 2003.

Three hours after the announcement, Mr McLeish entered the debating chamber to a round of applause to confirm his decision in person.

It took four minutes to end a six month nightmare of allegations that he sub-let his constituency office in Central Fife. He was accused of claiming the full MPs allowance for office expenses without registering a total of £36,000 in rent income over a 14-year period.

Although he said he was prepared to repay the full sum to the Fees Office if necessary the damage was done and public opinion turned against him. On Tuesday, while he admitted receiving the money, he said: "This was a muddle – it was certainly not a fiddle."

Mr McLeish said he was standing down over "mistakes" he had made in his constituency office finances – and errors he had made in handling the resulting political controversy. "I came to Parliament to work for the people I knew and grew up with – and to serve them. And if I have let them down in this matter, I have served them – I hope I have served them – well in many others," he said.

Jim Wallace, the Deputy First Minister and leader of the Scottish Liberal Democrats – Labour's coalition partners at Holyrood – will now take over as caretaker until the Labour Party elects a new leader in Scotland, who will in turn become First Minister, subject to endorsement by MSPs.

Bookmakers installed Jack McConnell, the Scottish Education Minister, as the 1/3 favourite to succeed Mr McLeish, with Wendy Alexander, the Scottish Enterprise Minister, second favourite.

Last night, the first hints of the bitterness in the race emerged, with friends of Gordon Brown, the Chancellor, claiming victory for Ms Alexander was a "fait accompli".

Bill Morris, the Transport and General Workers Union general secretary, said Ms Alexander would be a strong candidate. But Charles Clarke, the Labour chairman, issued a coded warning to Mr Brown that no one at Westminster would skew the outcome. "There will be no favoured sons or daughters promoted from London," he said.

Last night, the Prime Minister paid tribute to Mr Mcleish as "somebody who has given a lot of his time to public service. I think it is a very great shame what has happened. He was a distinguished First Minister and that is a role he was growing into."