Ms Moran claimed to treat dry rot at a house 100 miles
from her constituency
Labour MP Margaret Moran, whose expenses claims provoked widespread public anger, has announced that she will stand down at the next election.
The Daily Telegraph alleged she claimed £22,500 for treating dry rot in her designated second home in Southampton - 100 miles from her constituency.
A Labour disciplinary panel had been due to decide whether the Luton South MP could stand for the party again.
TV personality Esther Rantzen had also indicated she would challenge Ms Moran.
Reacting to Ms Moran's departure, Deputy Labour leader Harriet Harman said it was a "basic" requirement for MPs to have complied with the spirit as well as the letter of the expenses rules.
Ms Moran, who was first elected in 1997, initially defended her expense claims but then agreed to repay the cost of the controversial dry rot treatment.
However, pressure on her mounted when her case was referred to a internal Labour scrutiny panel set up to look at whether MPs who have made questionable claims should represent the party at the next election.
The panel, dubbed the star chamber, had its first meeting on Wednesday although neither Ms Moran nor any other MP under investigation attended.
In a statement announcing her decision to stand down, the Labour MP said: "It is with great sadness that I have today informed the General Secretary of the Labour Party, following discussion with my family, that I intend to stand down as MP for Luton South at the next general election.
"However, it is very important that I make it absolutely clear that I have done nothing wrong or dishonest in relation to my claim for expenses and have at all times acted on advice from the House of Commons Fees Office in relation to my family home in Southampton.
"It has been a privilege to serve the residents of Luton.
"I will work hard for my constituents until I step down as an MP at the next general election but the understandable anger in the media and amongst the public over the issue of my Parliamentary expenses has had a bruising effect upon my friends, my family and my health and it is for this reason that I have decided to stand down."
The House of Commons authorities have confirmed Ms Moran's financial arrangements had been cleared by the Fees Office in 2007 but they have now apologised for giving erroneous advice.
In a letter to Ms Moran, copied to Labour's Chief Whip Nick Brown, the Commons' director general of resources says: "I can confirm that the advice you were given at the time was wrong."
Ms Moran defends her conduct in a BBC interview earlier this month
A Commons employee, Terry Bird, had "apologised for the matter" and explained to Ms Moran what action needed to be taken "to resolve this matter", the letter adds.
Ms Moran nominated a property in Southampton as her second home, claiming thousands of pounds in public money every year for it, despite it being a long way from both her constituency and Westminster.
She argued these arrangements were necessary for supporting her family life.
As her partner had worked in Southampton for 20 years, he could not be expected to travel to and from Luton every day and it was important she shared the cost of the Southampton home with him.
Commenting on Ms Moran's resignation and that of Tory MP Julie Kirkbride, Ms Harman said it was not enough for MPs to say they stayed within the expenses rules but must show they "exercised good judgement" in the way they behaved.
"If they can't say to their constituents 'vote for me next time' they have to step down," she told the BBC.
Ms Rantzen told BBC Radio 4's The World at One that she might still stand in Luton South, despite the MP's decision to step down.
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