By George Parker and Alex Barker

Britain’s strictures to foreign governments are being mocked from Iran to the Turks and Caicos Islands, as world leaders seize on stories about MPs’ bloated expenses claims as evidence of moral decay in the UK.

Accounts of MPs billing the taxpayer for duck houses and moat cleaning have been lapped up around the world and have posed a problem for British diplomats who have previously been vocal in criticising corruption.

Mark Malloch-Brown, the foreign office minister, deleted sections of a speech he gave in Mozambique this month, fearing that his comments on higher standards of governance might be greeted with scorn.

His fears may have been justified, judging by the apparent delight being shown by leaders in recent days over the Westminster expenses scandal.

In a speech broadcast last Friday after the disputed June 12elections, Ayatollah Ali Khamenei, Iran’s supreme leader, said: “Many countries of the world, including western countries, that claim to fight corruption and money-laundering, are corrupt to their core.

“You have all heard about the [expenses scandals in the] British government and the parliament. The whole world heard the story and those were just parts of the story.”

Britain is being dogged by the expenses affair as it attempts to stamp out corruption in the Turks and Caicos Islands, a British overseas territory with a population of 32,000.

Ministers are preparing to suspend the islands’ constitutionand dissolve its parliament after an official inquiry found signs of “systemic corruption” and “political amorality”.

But Galmo Williams, the islands’ premier, told the Financial Times that British politicians “no longer have the moral authority to lecture other countries on corruption”.

The attack was echoed by Michael Misick, the former premier who resigned following revelations over his lavish lifestyle.

“We have a saying on the island - it is like the pot calling thekettle black,” Mr Misick told the FT. “How can you want to dissolve our parliament when you have these problems at home?”

One British diplomat admitted: “There’s no question that it feels a touch more uncomfortable, whether you are a minister or official, to talk about the importance of good governance or tackling corruption.”

The government is dismissive of suggestions that the expenses scandal has lowered Britain’s standing in the world.

This view is echoed by Alex Stubb, Finland’s foreign minister and a strong campaigner against corruption.

“Britain doesn’t usually lecture others about its own system and in any case we know about this affair because of transparency,” he said. “All democracies have to stay awake, butif there’s a problem you change the system.”

Vince Cable, the Liberal Democrat Treasury spokesman, claimed the expenses affair was also denting the ability of ministers to lecture City bankers on lower pay and bonuses.

Amid signs the City is returning to “business as usual”, he said: “You pick it up — the expenses issue has changed the psychological climate.”

One long-time City executive said: “Who are these people to lecture us on values? At least we don’t lie on our expenses.”