By politics.co.uk staff

The Liberal Democrats’ new chief secretary to the Treasury Danny Alexander is on the defensive after being accused of using a tax loophole to avoid paying capital gains tax (CGT).

Mr Alexander did not pay CGT on his London property, for which he claimed £37,000 on MPs’ expenses after designating it his second home, when he sold it for £300,000 in June 2007.

He avoided the CGT payment – which stood at 40% at the time – because he said it was his main home. CGT is not payable for three years after a property stops being the main residence.

Criticism of Mr Alexander, who was appointed George Osborne’s number two in the Treasury after David Laws resigned on Saturday after his own expenses scandal, is damaging perceptions of the Liberal Democrats’ reliability in the coalition government.

The suitability of the 38-year-old Inverness, Nairn, Badenoch & Strathspey MP for the vital Treasury role has also been called into question.

Mr Alexander has no economic experience but deputy prime minister Nick Clegg today said he was “as determined as anyone else… to get to grips with this financial crisis once and for all”.