Lord Hanningfield talks about prison with a warmth verging on the nostalgic. There was a comforting familiarity to Standford Hill prison on the Isle of Sheppey. Two cells away was former Labour MP Jim Devine (jailed for claiming £8,385 worth of false invoices), while on the upper floor was fellow Tory Lord Taylor of Warwick (jailed for false accounting to the tune of £11,277).

Hanningfield, born Paul White, says he learned a lot in prison – about drugs and illiteracy, recidivism and mental health problems. He can tell any number of funny stories about his experience; when he was sacked from his prison job at the health centre for "queue pushing", for example, Devine offered to set up an employment tribunal and fight a case of wrongful dismissal.

He says he's come out stronger, determined to pull his life together, rebuild his reputation and do good. He stops. He isn't always so optimistic, he admits. He became hysterical when he discovered he would be charged for fraud. For months he was terrified of travelling by public transport. How did the hysteria express itself? "Breaking down, really. Panic attacks. Crying. Fortunately I had the dog to go for a walk with. I'm not a suicidal type person, but I didn't want to be on a tube platform because the attraction was throwing yourself in front of a train."

Hanningfield was one of six MPs and peers jailed for fraud, and one of hundreds judged to have wrongfully claimed expenses in Britain's great parliamentary scandal. Like many of those who have been vilified, he seems to consider himself more wronged than wrongdoer; a victim of a dysfunctional system.

So what did he do? He claimed for overnight stays in London when he had returned to his Essex home and, on one occasion, was actually on a plane to India. In an interview with police in August 2009, he claimed he had been "singled out" and had simply done "the same as 500 or 600 other peers". In May 2011 he was found guilty on all six counts of false accounting and sentenced to nine months in prison. After serving nine weeks, he was released on home detention curfew.

We meet in February 2012, five months after his release. Hanningfield looks young for his 71 years, with a full and fleshy face, and a booming voice – he says he has always enjoyed his food and drink. He calls for me in his battered blue Audi and we head for a local pub, where he orders a large glass of sauvignon blanc and fish and chips. I tell him I'll pay. "Can you claim this on expenses?" he asks, then laughs, a little embarrassed.

Perhaps the most surprising aspect of the expenses scandal is the number of MPs and peers who claimed they did not know they were doing wrong. Back then, as well as being a member of the House of Lords, Hanningfield was leader of Essex council. It was a full, exhausting life. There were many rewards, he says, but money wasn't one of them. For his council work he was paid £30,000 a year, and for sitting in the Lords there were just expenses.

Did he ever think of himself as a dodgy geezer, a bit of an Arthur Daley? "Oh no, I never thought that, no." He sounds shocked at the suggestion. "No, I realise now I wasn't money-conscious enough. I paid my mortgage off, but it would have been better to remortage my property and use that money. I was living hand to mouth, you see."

Hanningfield has a complex relationship with money. He talks about it a lot, but it's hard to know whether that's just because of recent events. A former pig farmer, he says he was so busy with his public life that he failed to look after his financial affairs. He could have claimed a local government pension, but never got round to it. He felt obliged to treat visitors to the Lords to coffee and cake, and before you knew it that was another £30 gone. "I was more keen on serving the community than money. I didn't make any money out of it. I just wanted enough to carry on doing that job which I enjoyed."

And so he cut corners – or hid behind them. He claims he assumed he was entitled to the overnight allowance because it seemed fair. After all, he points out, many peers claimed overnight allowance even though they actually lived in London, simply because they had a property in the country which they could call their first home. "If I'd stayed in London, slept on the office floor or a park bench, I would have been eligible for it, but because I came back to Essex I wasn't eligible. Now they've changed it – I am now. It was all very well for the people who lived in London; they went maybe only two miles home, they could get all this money. But because I have a problem with getting back to Chelmsford, and if you'd had a few drinks you'd have to get a taxi, and a taxi home from Chelmsford late at night is about 30 quid…" He trails off, partly, you suspect, because he realises his argument is going nowhere. He can't make a cogent defence of what he did.

Other peers might have got away with bad behaviour but, as Mr Justice Saunders observed when sentencing, that did not make right Hanningfield's claim for overnight stays. "It is not for me to say whether peers should or should not be paid, but whatever you think of the scheme, it was not for any peer to take money to which he was not entitled, on the basis that he believes he is worth it," the judge concluded.

Hanningfield lives near Chelmsford with his Bernese mountain dog, Jefferson. He had a few relationships that might have ended in marriage, he says, but they never quite worked out. He doesn't think he would have got through all this without Jefferson's support. "It was a lonely time, apart from my dog."

Were there any humans he could turn to? "I didn't have many people to talk to, no. After 40 years in public life, you try to hide your inner thoughts… Would you like a coffee?" He insists on paying, even if I can claim.

Hanningfield was one of the last to be investigated over expenses. He says only one person complained about him, Lib Dem MP for Colchester Sir Bob Russell. Why? "As leader of the county council, I used a council car because I was here, there and everywhere. He knew I had been to the House of Lords in it – I couldn't have done both jobs if I hadn't had the car to get me around."

Hanningfield is not an unsympathetic character – convivial, open, awash with human frailties. But he is quick to blame others (opponents with vendettas, the Tories for failing to advise him, the leadership for throwing him to the wolves, the judge for sending him down despite the psychiatrist saying he had suicidal tendencies) and slow to accept responsibility. Wasn't it wrong to use the car to travel to the Lords, however practical? "I didn't think about it, that was the problem."

He was convinced he would not be prosecuted – after all, he says, he had no previous convictions and had claimed only around £13,000 wrongfully. "If you look through the Lords expenses, I was in the middle, so there was nothing unusual about my expenses compared with other people's." He was interviewed by the police in August 2009. "I told them I didn't think I was doing anything wrong. The amounts were relatively small. In the Commons they were buying three television sets and things like that. All you had to do in the Lords was tick boxes every month. All they ever checked was that you'd actually attended that day."

On 4 February 2010, Hanningfield heard that charges would be brought against him in relation to expenses. "A few friends met me in a pub that night because they knew how bad I'd be. Next day, it was announced on television at 11am that I was going to be charged. I resigned as frontbench spokesman of the Lords and leader of the council that day. It was a very traumatic day." Actually, he says, he didn't properly crack up until the following Christmas. "I felt panic. Terrible. So I went to a psychiatrist and he put me on Prozacy stuff. I'm not on as much now as I was then. During times like that, you just want to get home for the dog."

Hanningfield says he's not alone – many of the peers and politicians caught up in the expenses scandal ended up with severe mental health problems. "Margaret Moran hasn't gone down because she went nuts, which I understand totally." In September 2011 it was announced that Moran would face 15 charges of false accounting and six of forgery: in the period 2004-05, her claims totalled £168,569, the second highest of any MP. But two weeks ago, Moran was ruled "unfit to plead". She will not face trial.

Hanningfield mentions David Ruffley, the Conservative MP for Bury St Edmunds. "He was hounded for his expenses and he tried to..." He trails off again. On 17 June 2010 Ruffley was hit by the Gatwick Express at London's Victoria station. The train passed over him and he missed the live rail by inches. Ruffley took time off work for depression. He was said to have been devastated by criticism of his claims (including £1,674 for a sofa and £2,175 for a 46in Sony widescreen high-definition television), and by the fact that former Beirut hostage Terry Waite threatened to stand against him as an "anti-sleaze" candidate.

So, yes, says Hanningfield, compared with some he has come out of it all reasonably intact. I ask him what prison was like and he smiles. "I slept better there than I had for two years." Why? "The worry had gone. The worst part was when the judge was sentencing and then saying, 'Take him down.' And they do take you down, and put you in a cell, and you have to wait till a vehicle comes along. Somebody shouted out, 'There's a lord on board. I bet he's posh.' They all imagined I lived in a castle, whereas I live in a bungalow. Someone shouted out, 'Bet he went to Eton.' I shouted back, 'No, I'm just a farmer who went to grammar school.'"

As he drives me back to the station, Hanningfield, who returned to the Lords in April, talks about how he'd like to become a prisons campaigner and do something useful with his remaining years. ("The people you meet inside are generally nicer than on the outside," he says. "There's a lot of respect for age in prison.") I think he senses I'm expecting a mea culpa, but for Hanningfield it's not as simple as that. "A good friend said to me the other day, he would have thought I'd committed at least two murders for the amount of publicity I've had." And what does he think? "Well, with hindsight I feel I made a big mistake in assuming the House of Lords expenses were legitimate, and I obviously have done something wrong. And I've paid the price for it by going to prison. A big price. And now I've actually got to earn my respect back. I understand that." As I get out of the car, he calls me back. "But I'm sorry if I don't feel like a double murderer. I just don't."

Few MPs or peers who were named and shamed want to discuss expenses. Of the dozens contacted for this article over a period of 18 months, most, including David Ruffley and Margaret Moran, ignored the interview requests. Last October, former Labour MP Eric Illsley, who was sentenced to 12 months for false accounting, agreed to be interviewed, before backing out after an uncomfortable appearance on Newsnight, in which he justified his inflated expenses claims by saying it was "an allowance for living in London". Douglas Hogg, who was ordered by the Tory party leadership to repay the £2,200 cost of clearing his moat, politely declined. Peter Viggers, who notoriously claimed £1,600 for a floating duck house for his pond, made the following statement: "It's a matter of public record that I paid for the duck house myself. I did not receive any money for it. I have since sold it and made a rather useful donation to charity."

Conservative MP Julie Kirkbride, married to Conservative MP Andrew MacKay, replied stating: "If I am mentioned in any such article, you might draw attention to the fact that I was cleared of any wrongdoing with regard to my expenses claims, following a thorough inquiry by the parliamentary commissioner for standards in October last year." Kirkbride fails to mention that, at the same time, MacKay was ordered to apologise by the Commons standards and privileges committee for breaching parliamentary rules over his claims.

Tam Dalyell, also known as Sir Thomas Dalyell Loch, 11th Baronet, who retired in 2005 after 43 years in parliament, says the abuse of expenses goes back to 1963 and then Conservative chief whip Brigadier Martin Redmayne. "He said, 'We know there are a number of MPs in poverty, and it's impossible to put up MPs' salaries, so in the circumstances we will introduce some allowances.' Now, it began in a fairly modest way, but gradually those allowances became more and more favourable. Various chief whips of both parties said, of course MPs are falling far behind the recommendations of the senior salaries review body, but we will see you all right."

Dalyell blames the cowardice of successive governments, who were reluctant to put up salaries, but turned a blind eye to excessive or fraudulent claims. "The people I will defend are the fees office because they were instructed to be as generous as possible. They took a great deal of flak and feel extremely aggrieved."

He offers an example of their generosity. "A very nice man in the fees office said, 'Look, Mr Dalyell, you really would be much better off if you designated your London home as your first home and your home in Scotland as your second.' Now my home in London was two rooms above a public lavatory, and my home in Scotland was the first house asked for by the Scottish National Trust. The point is that the fees office was trying to be helpful to me, and why was this? Because they had been instructed by the government."

Dalyell was reported to have claimed £18,000 for three bookshelves just before he retired from the Commons. Does he think that was too much? "Nooooah," he bellows in his magnificent patrician voice. "What I did was this: I went to the fees office and said…" He comes to a premature stop. "I mean, I have to say to you first of all, I had ridiculously underclaimed all over, you can check that out. But I thought I was entitled to some bookcases for Hansards, and I said, 'I live in a National Trust house, I can't go to John Lewis. I therefore have got to ask you what would be a just balance between the more expensive bookcases, and the bookcases that would be an entitlement.' And they came, I think, to £7,800 rather than the £18,000 the Telegraph mentioned."

Where did the £18,000 figure come from? "That was the general cost of the bookcases." Did he claim that? "No, I certainly did not. I asked for a figure, and they came up with a just figure."

‘I knew that everyone would think I was a big liar and a sleazebag’: Jacqui Smith, the expenses scandal’s biggest scalp. Photograph: Zed Nelson for the Guardian

If the bookshelves were not an example of excess, what would he consider an excessive claim? "I think the excess was in dealing with property." Can he explain that? Another big pause. "In general terms, people were buying and selling property in a way they shouldn't. That is my general impression."

Jacqui Smith and her husband Richard welcome me to their Redditch home, the subject of much controversy. It is the family house she claimed was their second home, the one for which she bought (and claimed) an 88p plug and a £500 sink. The one in which Richard watched the two porn films for which Smith subsequently claimed.

Smith could not have been more abjectly humiliated. Perhaps the lasting image of the expenses scandal is that of a bearded Richard, standing outside the house, apologising for destroying his wife's political career. Today, he is freshly shaven and smiling, yet both have an air of nervousness. Smith has made regular television appearances since her downfall, but this is the first time they have spoken publicly, together, about the expenses scandal.

Richard, who was also Smith's parliamentary aide, is still angry. Not about the films – that, he says, was an embarrassing mistake. But about the house. He says they couldn't have checked the situation more thoroughly. Until 2004, the rule was that your first home should be in London. Then it was changed to be the house in which you spent the most time – and for Smith that was her sister's place in London, where she paid rent. Any claims were made on second homes.

"Especially when I was in the cabinet, I was spending more nights in London," Smith says. "So we wrote to them and said, I know it looks a bit weird, can you confirm this is OK? My kids live [in Redditch] but I spend more time in London. And they said, 'No, carry on as you are, because you are spending most of your time in London.'"

When John Lyon, the parliamentary commissioner for standards, investigated Smith's expenses, she felt the goalposts had been moved. His report introduced a concept that was new to her – that of "gravitational pull" which appeared to refer to the place that felt like home, where her family lived. While police evidence suggested that, between 28 June 2007 and 31 March 2008, Smith had spent 26 more nights in Redditch than in London (her account had suggested it was only two), for three of the four years in question she had spent more nights in London. Yet Lyon concluded that she should "have taken a broader view of her situation than she did" and ordered her to apologise to parliament.

"I was utterly pissed off with the report," she says. Why? "I was pissed off because he had taken seven months to do this investigation, it had completely hung over me…" The words come out in a rush. "I had spent hours sitting in front of him going through my ministerial diaries, my personal diaries, providing photographic evidence of where I had spent Christmas, because one of the allegations was that I didn't even spend Christmas in my sister's London house. Well, actually I had spent Christmas there, and here was a photo of me in the kitchen with a turkey. It was just ridiculous. He knew where I had been every single night for four years."

Smith says Lyon's findings did not come as a shock. "I wasn't at all surprised he found me guilty. The guy sat in front of me and said he was concerned about what all the blogs said, and he didn't like having Daily Mail photographers outside his house. I think he thought if he didn't find me guilty, he'd get a massive kicking." When asked to respond to this, Lyon said he did not comment on his inquiries.

How did Smith feel when the verdict was announced? "I was just…" She struggles for words. "Just… gobsmacked. I was completely gutted." She sniffs back a tear. "I just thought it was so unfair." She can no longer hold back her tears, and weeps. "I just thought it was terrible, because I knew then that everyone would think I was a big liar and a sleazebag, and I just wasn't… I had to talk to my mum and dad, and I thought, they'll think I've done something wrong and I haven't. So it was horrible. Really horrible. But then I knew it was going to the committee and I thought, they will at least be fair." She wipes her face. "Sorry… And they were really fair. In their report they said there were big mitigating circumstances, like I had actually asked whether I was doing the right thing. The committee made me apologise to parliament, which was horrible. I'd stood down by then." She had to: it had become impossible to do the job. "Any time I tried to go out and talk about crime or immigration or terrorism, it just came back to expenses."

Suddenly, a terrible smell overpowers us. Smith smiles. So does Richard. "It's the dog. Terrible farts." They laugh, and it lightens the mood.

Does she think she claimed excessively for, say, the £500 sink? "There were things on there that I now look at and think… we sort of forgot we were spending taxpayers' money." It was so easy, she says – "You just put the receipt in a bag and that was it. All of us took it a bit easy."

Does it bother her that she was portrayed as mean because of the 88p plug? "It's vaguely frustrating because you think, of course I didn't claim 80p. I claimed for a receipt that had to do with a whole load of maintenance and DIY stuff we'd done." She stops. "That is upsetting," she says. "The suggestion you're in it for 80p's worth."

In the event, both their parents were supportive, but not all of their friends. "When I was doing the Christmas cards there were a couple of people, and I've said to Rich, have you got the address of so and so, and he's said, oh, I'm not sure if I have and anyway that was one of the people who didn't bother to make contact." She says she was devastated when Harriet Harman was asked on radio if Smith ought to be allowed to stand again and failed to back her.

Did either of them end up taking medication for anxiety or depression? "No, no," Richard says nervously, looking at Smith. "We were all right."

"I didn't," Smith says. "No, I didn't. God, I had sleepless nights and…"

"It was tough," Richard says.

The important thing is that they've come through it, Smith says, and with their marriage intact. "It sounds a horrible cliché, but we're healthy, our kids are healthy, our family is. People often say to me, 'Are you OK?' And I say, 'Yes, I'm fine, and Richard's fine, and we're still together.'"

As they talk about their relationship, I'm checking out the DVDs underneath the television. I think Smith knows what I'm doing.

"We're very similar politically," Richard says.

"We disagree about pornography," Smith says, out of the blue.

Who's winning the porn wars? Smith laughs.

Richard: "It's interesting…"

Smith: "I think he's asking if you're still watching the films."

Richard: "Occasionally, yes. Hehehehe."

Smith: "I'm winning because I had the more justified position." Anyway, she says, he doesn't need porn now because she's back home.

Smith must have been livid with Richard for destroying her career over a couple of films. That's a fair summary, she says. But what hurt more were the people who thought the expenses scandal gave them licence to criticise everything about the couple's life. When the Birmingham Post described her as a failed teacher, she demanded an apology. One time she was canvassing on an estate with Richard and a woman asked how she dare bring him there, when there were children present. "You occasionally get people shouting 'porno' at you," she says.

We talk about the fairness of the punishments handed out. Richard calls it a farce, but they both agree that, after the claim for the films was discovered, there was no coming back.

Does Smith think some politicians in the Labour party were protected? Silence. I mention David Miliband (whose claim for a £199 pram was rejected) and Jack Straw (who paid only half the amount of council tax he claimed back in allowances over four years – he apologised and repaid the difference). "I don't think people were necessarily protected, but I do think…"

Richard finishes off the sentence for her: "…they were lost in the crowd."

‘I’ve done nothing to be ashamed of’: Lord Paul, who repaid £41,000 he'd claimed. Photograph: Zed Nelson for the Guardian

"Yes, exactly," Smith says, "lost in the crowd."

Hanningfield, too, speaks of feeling singled out and abandoned by his party. "It was only bad luck, really, that we were in the legal system, compared with lots of other people," he says. "I felt that I was one of the people who might have been expendable as far as the Conservatives were concerned, so nobody did anything to help me." Whereas Labour party members were encouraged to pay the money back as quickly as possible, he says, he received no advice from the Tory party. What's more, Labour party members were helped to get legal aid, while he is still paying off his lawyers' fees. "My total bill will be £200,000," he says. "I haven't paid it yet. I've paid £100,000. No one in prison could believe I was there for £13,000 – 70 years old, and it was my first offence. It's extraordinary really that I went to prison."

Hanningfield may plead poverty, but another Lord caught up in the scandal, Swraj Paul, was named the 87th richest person in Britain in the recent Sunday Times Rich List. His estimated £850m family fortune makes it all the more surprising that he was suspended from the Lords for claiming £41,000.

Paul was one of the first to be outed – not by the Daily Telegraph, which revealed most of the claims, but by the Sunday Times. The rules on expenses have changed post-scandal (nowadays peers can claim an allowance of £300 a day when they attend the Lords, regardless of where they live), but at the time he was allowed to claim an overnight subsistence allowance of £174, tax free. More than 150 peers claimed the allowance despite owning a property in London, and did not get into trouble. The problem with Paul's claims was that he never stayed at the one-bed flat in Oxfordshire that he claimed was his main home.

"The day after the Sunday Times published its story, I rang the clerk of the parliaments and said, 'I have never stayed there, but my interpretation is that as long as you have a second home, it's OK to claim. I can't see anything wrong, but if you can see something wrong, you can have the money.' I was told, 'We're not asking you to pay money.' They issued a press statement saying that on my own initiative I had asked that a full inquiry should be made, so I offered to pay. It came to £41,000 and, under their rules, I could have paid about £25,000. But I said, 'No, I want to pay.' They have recognised in the Lords report that I paid more than I needed to."

And that, he assumed, was that. But in May 2010, three months after the Metropolitan police had written to him saying it would not pursue its investigation, he was told he would be investigated by the subcommittee on Lords' conduct. In October 2010, the committee for privileges and conduct published its report, concluding: "We do not feel justified in finding, on the balance of probabilities, that Lord Paul acted dishonestly or in bad faith. However, his actions were utterly unreasonable, and demonstrated gross irresponsibility and negligence." Paul was suspended from the Lords for four months and resigned from the Labour party.

He says he would have no problem if he felt sanctions had been applied consistently, but he is convinced that was far from the case. He points out that the subcommittee chose to look at only four of 20 cases brought to its attention, whereas every MP was investigated. Then he names the three peers suspended from the Lords: himself, Baroness Uddin and Lord Bhatia.

"The three people they didn't clear were Asian."

Was that a coincidence? He pauses. "Very rarely do coincidental things happen. Lord Alli asked that question when the suspension was given and got a very tame reply." He believes other peers were jealous when he became a deputy speaker in the Lords, and even more so when he became a privy counsellor. "I have a very high profile in India, and not one person believes it wasn't racialism. They have written to me and said, Lord Paul, you have been saying we have got over racialism in this country. Well, if this isn't racialism, what is?"

Is he embarrassed about what happened? No, he says. "I couldn't care less. I feel so strongly that wrong has been done, that I have done nothing to be ashamed of. If they had accepted the money and that had been the end of it, I would have been more embarrassed because, yes, I might have made a mistake. But after the treatment… I feel that they decided to take an action, and that was it." He can't contain his anger. "Let me tell you one thing. In the financial year 2010 alone, I have given £1m to charity. Does anybody think that for bloody £41,000 I'd loot the country?"

Paul, who returned to the Lords earlier this year, says he has never known such viciousness in politics. Did he want to leave? "You can't leave the Lords. You can't resign." Did he think he would never go back there again? "Yes, but then I thought, I need to get my view across." To leave, he says, would have been a defeat. "And I will not accept defeat."

Back at Jacqui Smith's house, she says she knew she would lose her seat. Richard told her she was mad even to stand again, but she felt she had to. "I didn't want to just give in like that. I wanted to have the chance to say my bit to people on the doorstep… It was about not walking away from the people who had supported me."

Did she feel she had to take her punishment? "Yeah, I think there was a certain amount of that," she says. "You should pay your penance, I suppose." She now has a Saturday morning radio show on LBC and does consultancy work, and can't imagine standing for parliament again, not least because she knows she would never again reach such heights. And yet the pity is, she says, she doesn't think she'll ever be able to look back with pride.

In 2010, she was given a lifetime achievement award by the Labour Students national council. "It was lovely in a way," she says. It was only afterwards that it struck her what it meant. "Then part of you thinks, oh my God, you get a lifetime achievement award when you're going to die. That's my political death, I suppose."