Are MPs living in a dream world by voting to keep £24,000 allowance?

MPS were last night accused of having their "snouts in the trough" after refusing to surrender their ability to furnish their second homes with up to £24,000 of plasma TV screens and new kitchens from John Lewis stores.

But they voted in favour of limiting their pay increase to 2.25 per cent this year, which will add £1,391 to their current £61,820 salaries.

Some 155 MPs wanted a pay rise worth around 4.5 per cent, including 20 with Scottish constituencies. They lost a Commons vote after the government and Conservative front-bench combined to ensure the pay deal was kept in line with public sector deals in a bid to keep down the rate of inflation.

The most controversial move was the decision by MPs to refuse to back a major reform of their expenses.

This recommended scrapping the "additional costs allowance" of £24,006 a year, which covers rent or mortgage payments for a second home and allows it to be furnished with items up to the value of those sold by John Lewis.

MPs also refused to allow external auditors to scrutinise their claims each year, though they will still have to comply with the Freedom of Information Act.

More than 30 government ministers opted to keep the ACA, including Jacqui Smith, the Home Secretary, Andy Burnham, the Culture Secretary, and Shaun Woodward, the Northern Ireland Secretary.

The Scots MPs who voted for the 4.5 per cent pay rise were: Malcolm Bruce, Alistair Carmichael, Tom Clarke, Michael Connarty, Ian Davidson, Brian Donohoe, Nigel Griffiths, David Hamilton, Jim Hood, John McFall, Jim McGovern, Rosemary McKenna, Anne Moffat, Sandra Osborne, John Robertson, Gavin Strang, Sir Robert Smith and Mike Weir.

Liberal Democrat MP Danny Alexander said: "Those mainly Labour MPs, along with some Tories, who voted to block these radical reforms should be utterly ashamed of their self-serving and cynical votes.

"By voting to keep their snouts in the trough, Labour MPs have shown total contempt for public demand for a more open and accountable system."

MPs also killed off moves to subject their allowances to external audits following recent scandals. Instead, the Commons will continue to police itself with internal checks.

But they approved a new programme to kit themselves out with bigger and better constituency offices at an additional cost to the taxpayer of up to £3.2 million every year.

The vote ensures the controversy over MPs' expenses will continue, as they will still be able to use £24,006 a year to claim for furniture, electrical goods, kitchens and bathrooms.

The Members' Estimate Committee (MEC), who put forward the proposals, had urged the practice be scrapped following public uproar over recent months.

Chris Grayling, the shadow work and pensions secretary, said: "David Cameron and the shadow cabinet voted for the abolition of the John Lewis list while Gordon Brown and his most senior ministers went Awol. They are showing blatant contempt for public concerns."

Mark Lazarowicz, the Labour Edinburgh North MP, said last night: "I think MPs have made a big mistake … The public wants to see us putting our house in order."

Matthew Elliott, chief executive of the TaxPayers' Alliance, said: "MPs have missed a crucial opportunity to restore faith in parliament. By clinging to the plasma screen TVs and luxury kitchens allowed by the John Lewis list they have shown astonishing arrogance and disregard for people's concerns."

Soaring cost of living leaves Britons worse off than five years ago

Lindsay McIntosh

THE spiralling cost of living has left Britons 15 per cent worse off than they were five years ago, according to research published today.

Accountants Ernst & Young said crippling mortgage and debt repayments combined with rising fuel and energy prices had left households feeling the pinch.

The dire prediction came after the Bank of England warned that mortgage availability would continue to fall, as lenders tightened loans criteria in the face of rising defaults. Also yesterday – a day after housebuilding giant Taylor Wimpey announced plans to axe hundreds of jobs – Barratt Developments said it could be forced to shed about 1,000 positions.

In a bid to stymie the economic crisis and rein in escalating inflation, the European Central Bank yesterday raised its benchmark interest rate by a quarter percentage point to 4.25 per cent.

Ernst & Young said that households were now left with an average of £772.79 to spend each month after paying their fixed monthly outgoings – down from £909.84 in 2003.

Jason Gordon, director of retail at the firm, said: "Many UK consumer segments are feeling the pinch as big rises in household costs outstrip relatively modest wage inflation.

"Consumers are painfully aware of hikes in petrol and utility bills, but we've also seen some hefty price increases in pension contributions and debt repayments.

"If we factor in food price inflation, which official figures have placed at 8.7 per cent in the past year, it's clear household budgets are under enormous strain.

"Add the impact of falling house prices and the consumer economy is undoubtedly on a knife edge."

He said the worst could still be to come, with utility prices expected to rise by up to 40 per cent this year.

The report found fixed monthly household costs had soared by nearly 45 per cent during the past five years, to take up 53 per cent of people's total pay.

Homeowners were shelling out 78 per cent more in mortgage repayments than in 2003-4 at an average of £735 a month, due to a combination of higher interest rates and people taking out bigger mortgages

Monthly energy bills have leapt by 110 per cent during the period to an average of £95.80, while petrol costs for the typical family are 29 per cent higher at £193.61.