MSPs should lose their most controversial allowance - help from the taxpayers to buy property in Edinburgh - according to an independent review group looking at their expenses.

The panel, under Dundee University principal Sir Alan Langlands, also recommends cuts in some other expenses and a clampdown on office property deals involving political parties or MSPs' relatives.

They also say MSPs' staff deserve a better deal, but have caused some controversy by targeting the extra money on constituency MSPs on the grounds that their caseload is greater than those on regional lists.

It could cost more than £1m a year to give more to staff and allow them scope for a proper pay structure. Sir Alan pointed out yesterday that £45,000 for the staff of list MSPs' and £62,000 for constituency members compared favourably with the £64,000 paid by the Welsh Assembly and £85,000 at Westminster.

The 68 recommendations in the report covering accommodation, staffing, office costs, travel, party leaders and winding-up now go to the Scottish Parliament Corporate Body for approval.

Sir Alan said: "We hope our report will assist the SPCB in its aim of encouraging greater public confidence in the system of expenses operating in the Scottish Parliament. We believe it is fair and transparent."

He said the panel tried to work from first principles and in doing so applied the seven Nolan benchmarks for standards in public life: objectivity, accountability, openness, integrity, selflessness, honesty and leadership.

Of their main recommendation, he said: "The decision to recommend the abolition of mortgage interest payments was pretty finely balanced, but we take the view that a scheme which assists members to purchase a property which could result in a substantial profit and therefore personal gain at the point of sale fails the test of selflessness."

MSPs will not be able to claim for an office at home or one rented from relatives or business associates and there will be strict new rules on leasing from or to party political organisations or fellow parliamentarians, requiring independent valuations to ensure the rents are accurate.

The mileage rate has been cut, but overnight allowances have been increased slightly.

While MSPs will still be free to hire close relatives as staff, they will have to declare this under the plans.

Presiding Officer Alex Fergusson said last night: "The review panel has clearly delivered on the remit it was set by the SPCB and has not shied away from tackling the difficult issues which prompted this review to be commissioned in the first place."

The review was a vindication for Solidarity co-convener Tommy Sheridan who had campaigned against the accommodation allowance.

He said: "It is a disgrace that MSPs have taken so long to drag their snouts from the trough," but the Green Party protested at the divergent treatment of list and constituency MSPs.

A spokesman for Labour leader Wendy Alexander said she welcomed the review, adding: "Parliament should consider it and the changes suggested to the Edinburgh Accommodation Allowances as ways of restoring public faith in Parliament."