Treasury Chief Secretary David Laws was fighting to avoid becoming the coalition Government's first casualty tonight after it was revealed that he funnelled £40,000 of taxpayers' money to his secret gay lover.
The Liberal Democrat, who is in charge of slashing public spending, is facing growing pressure to quit after he claimed up to £950 a month in expenses for five years which was paid in rent to his partner.
Mr Laws was last night confronted with evidence that he could have breached Parliamentary rules on expenses, which ban MPs from renting from spouses or lovers.
He issued an apology and announced he would 'immediately' pay back tens of thousands of pounds claimed for rent and other housing costs.
David Laws with George Osborne earlier this week: He is under pressure to resign after it was revealed that he funnelled £40,000 of taxpayers money to his secret gay lover
The revelations are a setback for the coalition since Mr Laws's casual use of public money will undermine the Government's case for painful cuts to public spending.
Downing Street released a terse statement last night which said: 'The Prime Minister has been made aware of this situation and agrees with David Laws's decision to self-refer to the Parliamentary Standards Commissioner.'
Mr Laws is a multi-millionaire former investment banker who earned a double first in economics at Cambridge. He retired from the City at the age of 28.
James Lundie: David Laws' partner
Facing the expenses revelations in the Daily Telegraph, he chose to reveal that his partner is James Lundie, a lobbyist who used to work for former Lib Dem leader Charles Kennedy.
Sir Alistair Graham, former chairman of the Committee on Standards in Public Life, suggested Mr Laws should step aside from his job while the matter was investigated.
'I'm genuinely shocked that somebody who is now Chief Secretary to the Treasury is faced with disclosure of this nature where he clearly hasn't told the full truth to the people dealing with expenses in the House of Commons,' he said.
Labour backbencher John Mann said today Mr Laws had to resign from the Government, insisting his position was 'untenable'.
'Nick Clegg was meant to have carried out an audit of his MPs in the last parliament,' he said.
'These things should have been out in the open in the last parliament.
His position is untenable, if it is as reported. Certainly his position in the Government is untenable.'
The Bassetlaw MP dismissed the idea that Mr Laws' desire to protect his private life was an excuse. 'Who cares what his sexuality is these days?' he said.
Mr Laws escaped censure by the numerous Parliamentary inquiries into expenses because he had never admitted his homosexuality, meaning officials had no way of knowing his landlord was also his lover.
He has now referred himself to Parliamentary Standards Commissioner John Lyon, who will investigate whether he broke rules which, since 2006, ban MPs from 'leasing accommodation from a partner'.
But between 2004 and 2007, Mr Laws claimed between £700 and £950 a month to sub-let a room in a flat in Kennington, South London, owned by Mr Lundie, who was also registered as living at the property.
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