Britain's MPs are facing a summer of reckoning. All 700,000 pages of their expense claims are going to be published in July. It's an investigative journalist's dream - reams of fodder to mock and hound the political establishment.

Many of the revelations will be relatively minor, but taken together they are significant. Last year I began publishing my expense claims voluntarily. People wrote to me asking questions about individual domestic items. Quite right too - it's their money I'm spending.

With this process under way, Westminster is now awash with rumours that some serious misdemeanours may also come to light. Whatever happens, the drip-drip effect will hit all political parties very hard; although many of the accusations will be unfair (most of what MPs claim is absorbed by staffing costs), the impression that we are milking the system will stick.

So what can be done? Some people have suggested that the only solution is a dramatic increase in MPs' pay. I disagree. It may be odd that local government chief executives and senior Whitehall civil servants are paid so much more than MPs. But for parliament to be accountable to the public it serves, MPs should not seek to join the upper ranks of pen-pushing fat cats. We're already paid far more than public service workers who make the real, practical difference: the teachers, nurses, social workers and carers who get by on so much less.

A better solution, and one I have proposed to Gordon Brown and David Cameron, is that we simply stop MPs from using taxpayers' funds to buy second homes; establish a more transparent allowance for rental, utility and council tax costs instead; and remove any remaining opportunity for MPs to decide on their own salaries.

But sorting out MPs' pay and expenses is only part of the challenge. The bigger test comes from the admission that today's scandals lift the lid on a political system in crisis. Expense abuses are symptomatic of a politics that has become opaque, insular and far removed from the people it is meant to serve. We now have a once-in-a-generation chance to answer the public mood for a different kind of politics, and fix these bigger failings.

Britain is governed by a clique that secured barely 22% of the eligible vote at the last election. No other mature democracy anywhere in the world hands such unlimited power to so few people on such a threadbare democratic mandate. And the best our neutered legislature can do is yelp at the heels of its executive master. In 11 years the government has been defeated in votes by MPs just four times.

From dominating the parliamentary agenda to hiding bad news in a volley of announcements, our government wields extraordinary control. Take the budget. In exactly one week Brown and Alistair Darling will unveil a crucial budget at a time of acute economic crisis. Over the coming days, they will leak a barrage of carefully selected titbits to various parts of the media. On budget day itself they will produce hundreds of pages of statistics, many of which will seek to obscure the true picture of the government's finances.

At a time when thousands of people are losing their jobs and small businesses are folding every day, a real democracy would use such an occasion for genuine debate based on real facts that we have all been given time to absorb. Not in Westminster. This is a time for "political theatre" orchestrated to flatter the government and flatten opposition.

No wonder such a bankrupt political culture produces the sordid spectacle of swaggering confidantes to the prime minister trying to smear opponents. This says as much about the arrogance of unchallenged power in No 10 as it does about the questionable judgment of Brown.

Ignoring the growing resentment towards politicians is dangerous. I hear it in the public meetings I hold around the country: people want to give mainstream politicians a kicking. And if history teaches us one thing, it is that economic turmoil breeds political anger, frustration and extremism. And there are populists now poised to exploit the widespread feeling of powerlessness in this summer's European elections.

Change is difficult when the two establishment parties have every reason to keep the system stitched up between them. As long as they believe that they'll have a turn at the wheel, they have no interest in opening up our politics to real change, real democracy.

But we've got to do something different. And that should begin with urgent reform to the lamentable system of MPs' pay and expenses. But then it must go much further. We must reform politics itself.

• Nick Clegg is the Liberal Democrat leader

cleggn@parliament.uk