Deputy first minister is guilty of breaking Holyrood expenses rules

The mortgage on Mr Stephen's home in one of the Capital's most sought-after areas was held jointly with his wife, Caris Doig - a clear breach of Holyrood's regulations, parliamentary authorities ruled yesterday

Mr Stephen, who has risen to power on the back of a squeaky-clean image, yesterday admitted that he regretted the "error" but stressed that the investigation by Holyrood's governing body had found that neither he nor his wife had gained from the arrangement.

Last night the latest controversy over politicians' expenses led to a warning from the parliamentary authorities to MSPs to follow the rules and further calls for the allowance scheme to be scrapped.

Mr Stephen's joint mortgage was first revealed by a Sunday newspaper six days ago. At first, both the deputy first minister and the parliament denied that he had done anything wrong.

But members of the Scottish Parliament's Corporate Body, which manages Holyrood's budget, were given fresh details of the mortgage arrangements by Mr Stephen on Thursday.

They showed the names of both the minister and his wife on the agreement, contradicting an earlier document, lodged with the allowances office, which showed that he was the sole mortgage holder.

As MSP for Aberdeen South, Mr Stephen is entitled to claim for the interest on a mortgage for a second home in Edinburgh's exclusive Morningside.

A spokesman for the parliament said: "The SPCB found that the member had failed to follow the guidelines for the scheme by having a joint mortgage in place, post 2001.

"At this point, the guidance was clear that members were entitled to reimbursement of interest if the mortgage arrangement was in their name only."

The SPCB found that neither Mr Stephen nor his wife had gained from the "error", as the mortgage payment would have been the same if it was just in his name.

Mr Stephen, who has been claiming 9,000 a year allowances on the 190,000 home he bought with his wife in February 2002, said: "I fully acknowledge there has been a breach of the guidance.

"I very much regret this error. I sincerely believed the arrangements I had put in place were acceptable."

He said he had "acted promptly" to resolve the issues with the parliament and he had made the claim "in good faith and with no financial gain".

Mr Stephen said he had already taken steps to transfer the property and the mortgage into his name.

The parliament's spokesman added a warning to all MSPs last night. He said: "The SPCB concluded that this breach served as a reminder to all members to ensure they are alert to every detail of the allowances scheme and the handbook issued to them as guidance."

The allowance scheme has attracted heavy criticism with other ministers and MSPs under the spotlight for their claims.

Tommy Sheridan, the Solidarity MSP, said: "This is yet another example of MSPs using the rules to suit themselves and getting away with it. If Nicol Stephen had been a social security claimant wrongly getting benefit he would be in court or in jail by now but the parliament is lightly rapping his knuckles.

"This is the final nail in the coffin of the expenses scheme; it should be suspended immediately and the profits handed back to the parliament."

WHAT'S IN A NAME: KEY DETAIL OF MSPs' SCHEME

A REVISED members allowances scheme was agreed by the parliament in June 2001. It said that MSPs could claim the Edinburgh Accommodation Allowance (EMA) provided they were the only ones named on the mortgage of the property.

In March 2003 Mr Stephen's office gave Holyrood's allowances office a document which showed that his was the only name on the mortgage papers.

However, this was sent to Mr Stephen in error by his bank and the actual mortgage agreement - only given to the authorities on Thursday - showed that he and his wife held the mortgage jointly.

Before they pay out the EMA, officials require MSPs to show them their loan agreement or a loan offer along with a statement of the payments being made.

Some MSPs are still claiming allowances for mortgages entered into jointly with spouses before the rule change.

MSPs whose home is in one of 32 constituencies beyond easy reach of Holyrood can claim up to 10,900 a year in mortgage interest payments.