Prime Minister Julia Gillard has cleared her decks for action before next week's Budget by securing the suspension from the Labor Party of MP Craig Thomson and shifting him to the crossbenches.

The move erases the Government's majority in the House of Representatives - already cut to one through last week's suspension of independent Peter Slipper as Speaker - but allows Gillard to distance Labor from continuing scandals.

Thomson faces allegations of misuse of funds during his term as national secretary of the Health Services Union, Slipper criminal allegations of fraud and civil claims of sexually harassing a male aide.

Gillard also secured Slipper's agreement to stay out of the Speaker's chair longer than intended, reversing her earlier stand that he could return once criminal charges had been resolved despite continuing civil action in the Federal Court.


Thomson said he would continue to support Labor and the casting vote in any tie will lie with Deputy Speaker Anna Burke, a Government MP.

But if a Labor MP was absent from the floor without a pairing agreement with the Opposition Burke could not vote, creating serious difficulties for the Government.

Gillard said the suspensions were necessary to restore crumbling faith in the nation's Parliament, conceding that Australians saw a dark cloud above federal politics.

She said both MPs had agreed with her view. Thomson said he had also privately canvassed colleagues on a possible move to the crossbenches.

But the moves have been widely greeted with cynicism because of Gillard's earlier unconditional support for Thomson and Slipper on the basis of presumption of innocence, resisting all pressure to force their suspension until respective allegations had been resolved.

The deepening scandal threatened to seriously undermine the momentum the Government hopes to win with the May 8 Budget and the delivery of a promised surplus.

Labor needs this if Gillard is to have any chance of leapfrogging an unrelenting run of political disasters and overturn record lows in opinion polls, which have for months predicted a landslide victory next year for Opposition leader Tony Abbott.

Gillard is also trying to quash doubts about her political judgment and leadership, but yesterday's sudden announcements on Thomson and Slipper will do little by themselves to silence criticism.


Renewing calls for an early election, Abbott yesterday demanded that Thomson be prevented from voting in the House until the allegations against him were resolved one way or the other.

"This Government only survives because of tainted votes," he said. "If the Prime Minister wants to claim the high moral ground she's got to disown the vote which is now being exercised by someone facing such serious allegations."

Abbott said Thomson's suspension was not about Parliament's integrity, but to shore up Gillard's votes.

Gillard said the allegations against Thomson and Slipper had caused concern about standards in public life, and she believed it was appropriate for Thomson to be suspended from the Labor Party.

"I have made a judgment call which I believe is right, because I want Australians to be able to look at the Parliament and respect the Parliament, and I believe a line had been crossed about the ability of Australians to confidently say that they had respect in our Parliament."

Gillard said the move did not imply any prejudgment and that presumption of innocence would continue through the proper processes.

The allegations against Thomson centre on his time as HSU national secretary between 2002 and his election to Parliament in 2007, and claims that he used his union credit card to pay for brothel visits and escort services, and to finance his election campaign.

A Fair Work Australia investigation is complete and will be released in about two months to a Senate committee.