Labour MP David Chaytor says he is happy to talk to police and wants to clear his name
Scotland Yard has decided to launch an investigation into the alleged misuse of expenses by a small number of MPs and peers, the BBC has learned.
Police say its economic and specialist crime command will investigate.
Labour's David Chaytor has confirmed he is one of the MPs under scrutiny, and the BBC understands his party colleague Elliot Morley will also be interviewed.
Meanwhile the Daily Telegraph says more than 50 MPs have claimed expenses for council tax they have not paid.
The MPs are said to have claimed more than the rates of tax published by town halls.
Scotland Yard's investigation follows a public outcry about the way some MPs used their allowances.
The decision to launch an investigation follows several weeks of preliminary inquiries by a team of police investigators, prosecutors and legal experts.
Two weeks ago police said it was highly unlikely anyone would face prosecution, but now appear to have changed their minds.
SURPRISE IN WESTMINSTER
This decision by the Metropolitan Police to start an investigation came as something of a surprise to a Westminster which had come to believe that it would be unlikely.
But a joint team set up by the Metropolitan Police and the Crown Prosecution Service to look into the issue has obviously now come to the conclusion that undertaking an investigation is the best course of action.
The police say it concerns "a small number" of MPs and peers; only the Labour MP David Chaytor has so far confirmed that he has been in contact with the police. He says that he will co-operate and hopes to clear his name.
But this is a new twist in the tale of MPs' expenses and one which serves to remind people about a saga which politicians were hoping to be able to put behind them in favour of talking about how to reform the system for the future.
Mr Chaytor said his solicitor had been contacted by the police. He said he would co-operate fully with the investigation once he was invited for an interview.
"I want to explain my case, explain what happened. I've acknowledged that there is an error here and I want to clear my name," he told the BBC.
In a statement, the Labour Party said: "It would be inappropriate to comment on an ongoing police investigation; however we always expect all Labour Party representatives and members to cooperate fully with the police.
"The Labour Party has already taken tough action on expenses, including barring MPs found to have broken the rules from standing as Labour candidates at the next general election."
The Conservative Party has declined to comment.
The BBC has so far been unable to speak to the two Labour MPs and the Labour peer thought to be among those under investigation.
Mr Chaytor, Labour MP for Bury North, and Mr Morley, Labour MP for Scunthorpe, both announced they would stand down after it emerged they claimed interest payments for mortgages they had paid off.
Labour peer Baroness Uddin, who apparently claimed an empty Maidstone flat was her main home so she could claim expenses for peers living outside London, may also face questions, the BBC understands.
If there is wrongdoing it needs to be investigated
Metropolitan Police Commissioner Sir Paul Stephenson has been holding a series of talks with Director of Public Prosecutions Keir Starmer over the allegations.
The senior officer said his detectives would follow the evidence. Speaking on Thursday, he said: "We will make a decision on what the evidence is or is not."
He said the Parliamentary authorities have given "good co-operation" after investigators asked for more information.
Two weeks ago, the Metropolitan Police ruled out wide-ranging action against the majority of parliamentarians embroiled in the controversy.
Officers believe there is only a realistic chance of prosecution in cases where it can be proved individuals misled Parliament's Fees Office.
Mr Chaytor has said he would pay back £13,000 after admitting an "unforgivable error" in continuing to submit £1,175 monthly bills for a paid-off loan.
Mr Morley was suspended from the Parliamentary Labour Party after admitting a similar £16,000 claim and referring himself to the Westminster sleaze watchdog.
The investigation will be overseen by the Metropolitan Police's temporary assistant commissioner Janet Williams, a former special branch commander.
Ben Brogan, Daily Telegraph: "It will be up to the individual MPs to explain"
In a statement, the force said: "After consideration by the joint Metropolitan Police and Crown Prosecution Service assessment panel the Met has decided to launch an investigation into the alleged misuse of expenses by a small number of MPs and peers."
On Friday Parliament published a list of MPs who have repaid claims, suggesting 182 from all parties had returned money totalling £478,616.
Many said that while claims had been within the rules, they were responding to constituents' anger.
The scandal has enveloped all the major parties and prompted the resignations of at least two cabinet ministers.
Business Secretary Lord Mandelson said in an interview with BBC World that it was "inevitable" that the police would become involved.
"If there is wrongdoing it needs to be investigated. That's how we do things in Britain," he added.
The House of Commons is coming under mounting pressure to abandon security measures which allowed large swathes of MPs' expense claims to be censored.
Council tax claims
Meanwhile, the Daily Telegraph said many MPs' claims for council tax on their second homes had been in excess of town halls' published rates by house band.
It also said 18 of the 50 politicians accused over their council tax claims had already made re-payments to the Commons Fees Office.
The paper says Labour MP Eric Illsley was accused of over-claiming by more than £6,000 between 2004 and 2008, but refused to comment.
Former minister Beverley Hughes was said to have profited by up to £2,000 - she told the paper she was checking her records, but did not believe the amount was as much as that.
Ex-home secretary David Blunkett told the Telegraph he may have over-claimed by £178, while government whip Mark Tami allegedly profited by about £1,500.
Mandelson backs claims investigation
Mr Tami said: "I am going to look into whether I have over-claimed and if I have then clearly I will pay back any over-claim."
Tory MPs David Willetts and Jeremy Hunt admitted to having over-claimed for council tax by about £500 each, the Telegraph said.
Mr Willetts said it was possible that he had "inadvertently" claimed for an 11th month while his council tax bills were divided into 10 payments.
"If I have inadvertently made incorrect claims I will of course pay any money back," he said.
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