The Labour Party declared the MP’s career to be “effectively over” after a damning report by the Standards and Privileges Committee detailed how he had knowingly submitted 19 false invoices over a four-year period that were “plainly intended to deceive” Parliament’s expenses authority.
The committee, which adjudicates on sleaze allegations against MPs, said it was the “gravest case” it had dealt with.
It was impossible to say how much Mr MacShane had claimed “outside the rules”, the committee said, but it “may have been in the order of £7,500”.
His punishment reflected that his actions had been “so far from what would be acceptable in any walk of life”.
In a report published today, it said: “He has expressed his regret, and repaid the money wrongly claimed.
“But this does not excuse his behaviour in knowingly submitting 19 false invoices over a period of four financial years which were plainly intended to deceive the Parliamentary expenses authorities.
“This is so far from what would be acceptable in any walk of life that we recommend that Mr MacShane be suspended from the service of the House for 12 months.
“This would mean he lost his salary and pension contributions for this period.”
The committee’s recommendation must be approved by the Commons - a formality which is usually passed on the nod.
Mr MacShane previously had the whip withdrawn by Labour when allegations from the British National Party that he abused his expenses were taken up for investigation by Scotland Yard in September 2010. He was reinstated in July when the Metropolitan Police said they were taking no further action.
Labour today suspended him from the party and said it would be talking to him about “the best course of action” for him and his Rotherham constituency, which faces having no MP for a year.
A party spokesman said: “These are very serious findings concerning Denis MacShane and we accept his statement this morning that his career as a Labour MP is effectively over.
“In the light of the report’s recommendations to the House, the Labour Party has suspended Denis MacShane with immediate effect, pending a full NEC (National Executive Committee) inquiry.”
In a statement, Mr MacShane said the BNP had won a “three-year campaign to destroy my political career”.
He stressed that the police investigation had not gone anywhere and that the Standards and Privileges Committee “notes that there is no question of personal gain”.
“Clearly I deeply regret that the way I chose to be reimbursed for costs related to my work in Europe and in combating anti-semitism, including being the Prime Minister’s personal envoy, has been judged so harshly,” he said.
“I remain committed to work for progressive values, for Britain playing a full part in Europe, and for combating anti-semitism even though I can no longer undertake this work as a Labour MP.
“I am consulting family and friends as I consider my position and study the full implications of the report. I am obviously desperately sorry for any embarrassment I have caused my beloved Labour Party and its leader Ed Miliband whom I greatly admire.”
Jahangir Akhtar, a senior local Labour Party councillor in Rotherham, South Yorkshire, spoke of his “shock and sadness” at the findings, saying he counted the MP as a friend who would not be feeling in a “good place” right now.
Mr Akhtar, who is also deputy leader of Rotherham Metropolitan Borough Council, said: “I’m very saddened that this has happened. I’ve known Denis for a long time, he’s a friend.
“I think my first reaction is of shock and sadness. Denis has been an excellent constituency MP and it is very sad to hear of the recommendations of the Standards Committee.
“As far as we were concerned, once the police investigation was dropped because there was no case to answer, that was the end of the matter.”
Mr Akhtar said the local party would not “twist the knife” on Mr MacShane but many members would feel “let down”.
“He has got to be very sad. He’s been in politics for a long, long time and took great pride in the way he has represented the constituency of Rotherham.
“I’m sure he’s not in a good place at this time.
“Clearly he’s made mistakes and we have to respect what the Parliamentary standards committee has said.
“The party will have a view to his future but we are not going to hang somebody out (to dry) without just cause.
“I think it will be a time for reflection for the constituency party.
“It does not leave the party in a good light - many people will feel let down.”
Parliamentary Standards Commissioner John Lyon, whose investigations into Mr MacShane’s conduct led to today’s report, said Mr MacShane had breached the rules and Code of Conduct for MPs in “an extremely serious way”.
“On reflection, I hope he might recognise that overall his conduct fell far below the standards of integrity and probity expected of every Member of the House,” Mr Lyon wrote in a report to the committee.
The MP entered 19 “misleading” expenses claims for research and translation services from a body called the European Policy Institute, signed by its supposed general manager.
However, the institute did not exist “in this form” by the time in question and the general manager’s signature was provided by Mr MacShane himself or someone else “under his authority”.
“The sum claimed was not a sum determined by the general manager of the EPI to meet the cost of services commissioned on Mr MacShane’s behalf. It was the sum of money entered on his computer by Mr MacShane himself.
“In effect, he was sending the invoice to himself and writing his own cheque. The claims were paid out unchallenged by the House authorities and the money put into separate bank account which Mr MacShane controlled.”
The Commissioner added: “The effect was that, unbeknown to the (expenses) department, Mr MacShane was submitting invoices to himself and asking the parliamentary authorities to pay.”
Mr Lyon also described how Mr MacShane had a “cavalier approach” to the use of public money in purchasing computer equipment which was not used solely in support of his parliamentary inquiries.
“In some cases, at least, it appears that Mr MacShane allowed an outgoing intern to take away with them a parliamentary-funded laptop, and then bought a new one for his or her successor,” the commissioner wrote.
In less than three years, he obtained 14 computers, six provided by the Commons and eight purchased on his expenses.
Mr MacShane also claimed for his own “extensive travel across Europe”, including air fares, hotels and meals. He took one trip to Paris on the pretext of interviewing personal assistants - a purpose that did not justify using his Commons expenses.
He also used his parliamentary expenses to “entertain his European contacts” and claimed for his “extensive” book purchases.
“Mr MacShane’s claims went way beyond what was reasonable and, in my judgment, seemed to border on him using parliamentary resources to build his personal European library,” the Commissioner wrote.
The Commissioner said Mr MacShane also breached the Code of Conduct by refusing to co-operate with his inquiry.
The claims relate to the former discredited expenses regime which has been swept away and replaced by a system overseen by the Independent Parliamentary Standards Authority.
The TaxPayers’ Alliance urged the Government to introduce legislation enabling constituents to get rid of their MP in cases like Mr MacShane’s.
Chief executive Matthew Sinclair said: “If the House of Commons endorses this report and Mr MacShane is suspended from Parliament, the people of Rotherham will go unrepresented in the Commons for a whole year. This is simply not fair.
“A politician cannot claim to be a credible representative of his electors if he is suspended from the Commons for 12 months.
“This case underlines the urgent need for a recall mechanism to be introduced. This would enable constituents to decide at the polls if they believe their MP is fit to remain in place or whether they would rather see a by-election to elect a successor.
“The coalition agreement proposed a right to recall but the Government has failed to propose effective legislation in this area. It should now do so as a matter of urgency.”