Tory peer Baroness Michelle Mone will take a leave of absence from the House of Lords with immediate effect.
Baroness Mone is at the centre of controversy over her links to a firm awarded £200m of PPE contracts.
The development comes as the government is set to not oppose a motion tabled by Labour in an attempt to force ministers to publish documents related to the contracts.
PPE Medro was granted contracts to make surgical gowns and masks during the COVID pandemic after Baroness Mone flagged the firm to ministers through a so-called “VIP lane” system.
She has since faced accusations of profiting from the business, but has consistently denied any “role or function” in the company, with lawyers previously saying she is “not connected to PPE Medpro in any capacity”.
A spokesman for Baroness Mone said: “With immediate effect, Baroness Mone will be taking a leave of absence from the House of Lords in order to clear her name of the allegations that have been unjustly levelled against her.”
The leave of absence means Baroness Mone will not attend sittings of the House, vote on any proceedings and will not be able to claim any allowance.
Baroness Mone still has the Conservative whip.
Calling for the release of PPE contracts awarded to PPE Medro, Labour’s deputy leader Angela Rayner accused members of the Tory party of using the pandemic as an “opportunity” to “get rich”.
Describing the so-called VIP lane as “a scandal of epic proportions”, she said the company was awarded a £122 million contract for gowns that “could not be used” and that £700,000 of “taxpayers’ money” a day is now being wasted on storing the unusable PPE.
Ms Rayner added: “This looks very dodgy – people making huge sums of money on PPE that couldn’t be used. It needs to be exposed now. Those documents need to come out and it needs to be out in the open.”
The company has denied that the kit was faulty.
The VIP lane system saw a separate mailbox set up for MPs to send on offers from firms, but led to the government being criticised for giving preferential treatment to companies with political contacts.
Speaking ahead of the vote, Ms Rayner said: “Tory MPs can either back Labour’s binding vote to force ministers to come clean on the murky award of £203m in taxpayers’ money to a shady company linked to a Tory peer, or they are choosing to be complicit in a cover-up.”
Baroness Mone is currently under investigation by the House of Lords’ commissioner for standards, with parliament’s website saying the probe is over “alleged involvement in procuring contracts for PPE Medpro leading to potential breaches…of the House of Lords code of conduct”.
A spokesperson for the Department of Health and Social Care said: “Due diligence was carried out on all companies that were referred to the department and every company was subjected to the same checks.
“We acted swiftly to procure PPE at the height of the pandemic, competing in an overheated global market where demand massively outstripped supply.”
They added the department was “currently engaged in a mediation process with PPE Medpro”, so could not comment on the specifics of the contract.
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Baroness Mone to take leave of absence from House of Lords amid PPE contracts controversy