Expense scandal claims Treasury minister

THE expenses scandal claimed another casualty last night, as a Treasury minister resigned from the government amid allegations that she avoided paying up to £17,000 of tax on the sale of her constituency home.

It was reported that Kitty Ussher "flipped" the designation of her second home shortly before selling it in 2007, avoiding capital gains tax.

In a letter to Gordon Brown, Ms Ussher said she had not abused the expenses system, but did not want to cause "any embarrassment" to the Prime Minister or his government.

However, her departure comes at an inconvenient time for Mr Brown, as he was hoping to start putting the expenses row behind him and shift the agenda back on to such policy areas as public spending and cuts.

It was reported last month that, within months of being elected in 2005, Ms Ussher asked Commons authorities to fund extensive refurbishment of her Victorian family home in South London, including the removal of a "bad taste" Artex ceiling.

She was moved to the post of Exchequer Secretary to the Treasury just 13 days ago in Mr Brown's latest reshuffle. She had served in a more junior role at the Treasury before spending nine months at the Department for Work and Pensions (DWP).

Downing Street announced that Portsmouth North MP Sarah McCarthy-Fry was moving to the Treasury to replace Ms Ussher, after less than a fortnight at the Department for Communities and Local Government, where she was given responsibility for local democracy and council finance in the recent reshuffle.

A Number 10 spokesman said: "The Prime Minister has accepted the resignation of Kitty Ussher. Sarah McCarthy-Fry has been appointed as her replacement. A successor to Ms McCarthy-Fry will be announced in due course."

In her resignation letter to Mr Brown, Ms Ussher said she was leaving the government "with the greatest regret" but would remain as MP for Burnley until the coming election, when she was standing down from parliament "for family reasons".

Explaining her decision to quit, she wrote: "I arrived at this decision because I do not want to cause you or the government any embarrassment.

"I did not do anything wrong. At all times, my actions have been in line with HM Revenue and Customs' guidance and based on the advice of a reputable firm of accountants, who in turn were recommended by the House of Commons Fees Office. Neither have I abused the allowance system of the House of Commons in any way."

She added: "I support your leadership and am 100 per cent loyal to the Labour Party, which is why I do not wish to cause you or the party any difficulties."

Ms Ussher, 38, who has two children under five, said she came to the decision "some time ago" to leave parliament at the next election for family reasons.

She said in her letter: "The hours of parliament simply don't work with the kids. There is no other reason for this decision."

It was reported by the Daily Telegraph last night that Ms Ussher had redesignated a property in her Burnley constituency as her main home for one month before selling it in 2007, with the result that she did not have to pay capital gains tax at 40 per cent on the profits.

According to a letter from her accountant, Ms Ussher had previously named her home in south London to HM Customs and Excise as her main residence. She identified the Burnley house as her second home for parliamentary expenses claims.

In the letter, the accountant stated: "I am enclosing a declaration to vary your previous main residence election for a period of one month to (the Burnley home] and then back to (the London home]. The effect of varying the election is that (the Burnley home] will receive the final three years' main residence exemption and the gain will be completely exempt from capital gains tax provided (the Burnley home] is sold before April 2007."

The property was sold in March 2007 for £62,000, making Ms Ussher and her husband a profit of more than £40,000, the Telegraph reported. As it was classed as her main home, she was not liable for CGT, saving the couple a sum estimated at between £9,750 and £16,800. The procedure is legal, but has already caused problems for several MPs, including former communities secretary Hazel Blears, who repaid £13,000 to HMRC. Mr Brown described her avoidance of CGT as "totally unacceptable".

News of Ms Ussher's departure emerged on the eve of the publication by the Commons authorities of details of all MPs' expenses claims, and just moments before her boss, Chancellor Alistair Darling, rose to deliver one of his biggest set-piece speeches of the year at Mansion House in the City of London.

On arrival at Westminster at the 2005 election, Ms Ussher was swiftly promoted. She joined the Treasury as part of Mr Brown's first government after coming to power in June 2007, then moved to the DWP in October last year before returning to the Treasury this month.

Labour officials in Ms Ussher's constituency last night expressed shock at her decision to quit. Peter Pike, who preceded her as Burnley's MP for 22 years, and is now the constituency party chairman, said it was "totally unexpected".

EXTRACTS FROM HER SURPRISE RESIGNATION LETTER TO THE PM:

Dear Gordon,

It is with the greatest regret I have decided to resign from the government. I do not want to cause you or the government any embarrassment.

I did not do anything wrong. At all times my actions have been based on the advice of a reputable firm of accountants.

I decided some time ago, completely for family reasons, that I would not be putting my name forward to contest the next general election. The hours of parliament simply don't work with kids.

Thank you for giving me the opportunity and honour to serve in government. I have enjoyed every second of it.

Yours sincerely, Kitty Ussher MP