Expenses scandal threatens to engulf Tory peer

The Conservative Party co-chairman is facing mounting calls from Labour and a former sleaze watchdog for a full investigation.

There was little sign of support for the Yorkshire-born peer from Downing Street or fellow Ministers last night.

Tory deputy chairman Michael Fallon said the peer “believes” she acted within the rules, but he admitted the controversy was embarrassing for the party.

Lady Warsi insisted she made an “appropriate payment” to her friend – Tory official Naweed Khan, who is now one of her aides – for the nights she stayed at the property in Acton, west London.

Mr Khan has supported this claim. However, the property’s owner, GP and former Conservative donor Wafik Moustafa, denied receiving any income from either Lady Warsi or Mr Khan.

Baroness Warsi, now a Cabinet Office Minister without portfolio, was claiming Lords subsistence of £165.50 a night at the time the allegations relate to, in 2008.

Sir Alistair Graham, a former chairman of the Committee on Standards in Public Life, said: “It all looks very muddy and blurred and worthy of a full investigation.” He suggested that Baroness Warsi should relinquish ministerial office until inquiries were complete.

Labour MP for Bassetlaw John Mann said he would write to the Lords standards commissioner requesting an investigation. “If you are paying no rent where you are staying, you can’t possibly be claiming subsistence for staying there,” he said.

“If payments were made to her adviser then he will have paid income tax on them. He should publish his tax returns.”

Shadow Cabinet Minister Chuka Umunna said: “To rebuild trust and demonstrate this is being dealt with in a proper way there has to be a proper, independent investigation. So long as these stories endure, we are going to struggle to rebuild the trust.”

In a further embarrassment for Dewsbury-born Lady Warsi, the most senior Muslim politician in Britain, she was forced to admit failing to declare rental income on a London flat in the Lords register of interests. She said the omission was down to an “oversight”, adding she had reported the letting of her Wembley flat in the Register of Ministers’ Interests. The arrangement had also been declared to the Cabinet Office and HM Revenue and Customs, she said.

She bought the property in 2007 but moved closer to Parliament when she became a Minister in 2010, after which she began letting the Wembley flat. Peers are required to declare sources of income of more than £500.

In a statement last night, Lady Warsi said she contracted to buy the flat in September 2007, but it was not due to be ready until the following year. In the interim she stayed predominantly at two hotels but also, for “occasional nights”, at an Acton property occupied by Mr Khan.

“The completion date for the property was slightly delayed, and not having made advanced bookings for these hotels, there was a period of around six weeks when I spent occasional nights at a flat in Acton, which was occupied by Naweed Khan, at the time a member of Conservative Campaign HQ staff. For the nights that I stayed as a guest of Naweed Khan, I made an appropriate financial payment equivalent to what I was paying at the time in hotel costs.

“In March 2008, I moved into the flat in Wembley. As I was living in the property, it was therefore not registrable on the Register of Lords’ Interests.”

Dr Moustafa said the Acton property had been Lady Warsi’s “place in London”.