The RCMP has dropped its criminal investigation into former Harper chief of staff Nigel Wright, lifting the biggest cloud hanging over the Prime Minister's Office in the ongoing Senate scandal.

But the governing Conservatives, who have been dogged by the Senate expenses controversy for nearly a year, must still wait to see whether the Mounties lay charges against suspended Senators Mike Duffy and Pamela Wallin, both Harper appointees to the Red Chamber.

If Mr. Duffy is charged, the Tories risk a further public airing of the PMO's efforts to manage fallout from his spending record – the RCMP want Mr. Wright to testify if the matter goes to court, a senior government source said.

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"It was decided that it was best for him to act as a witness," the source said of Mr. Wright.

The turn of events also benefits Stephen Harper because the Mounties have decided they do not need to interview the Prime Minister after concluding they would not charge Mr. Wright.

The RCMP explained Tuesday they wrapped up their investigation into Mr. Wright, which began in June, 2013, because "the evidence gathered does not support criminal charges against Mr. Wright."

The Mounties were probing a secret $90,000 payment Mr. Wright made to Mr. Duffy. The wealthy businessman quit as Mr. Harper's chief of staff in May, 2013, after it was revealed he had dipped into personal funds to reimburse taxpayers for questionable expenses claimed by the PEI senator – an effort to make controversy over them subside.

Tuesday's announcement is a dramatic change from court documents filed in November, 2013, when the RCMP had alleged that Mr. Wright committed bribery, fraud and breach of trust after he bailed out Mr. Duffy to put a lid on the spending scandal.

Speaking through his lawyer, Peter Mantas, Mr. Wright said he has been vindicated.

"My intention was to secure the repayment of taxpayer funds. I believed that my actions were always in the public interest and lawful," Mr. Wright said via Mr. Mantas. "The outcome of the RCMP's detailed and thorough investigation has now upheld my position."

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However, Mr. Wright is not yet expected to return to his former employer, private equity giant Onex Corp.

The Mounties have referred the matter of the $90,000 payment back to federal Conflict of Interest and Ethics Commissioner Mary Dawson for further review, and the outcome of her investigation could have a bearing on Mr. Wright's future.

The RCMP probe, while concluded, was politically damaging for the Conservatives. It brought the crisis to the Prime Minister's doorstep, linking his top aide's actions to potential wrongdoing.

Mr. Harper has repeatedly said he knew nothing of the secret payment, but e-mails released as part of the investigation suggested that the Prime Minister was at least kept abreast of discussions between Mr. Duffy and his chief of staff.

The RCMP investigations into Mr. Duffy and another Conservative-appointed senator, Ms. Wallin, are ongoing; the Mounties have already laid fraud charges against former senator Mac Harb and suspended senator Patrick Brazeau.

Still, the Conservative government was relieved Tuesday night to hear of the RCMP decision – the first development in the past 12 months that's put distance between the PMO and Mr. Duffy. One senior official described the mood as "champagne corks popping."

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"We are pleased the RCMP has made progress in their work. The Prime Minister's Office will continue offering every possible assistance to the RCMP's investigation," PMO spokesman Jason MacDonald said in a statement.

The Official Opposition New Democrats cried foul Tuesday, criticizing the RCMP for its decision.

"If Canadians had any doubt that Ottawa was broken before, they certainly know that Ottawa is badly broken now," NDP ethics critic Charlie Angus said. "It's now okay to make a secret payout from the Prime Minister's Office to a sitting senator to make a political problem go away."

He said the law would appear to say that such payouts are illegal. "According to the Parliament of Canada Act, you cannot make a payment to a sitting senator. That's an indictable offence, but apparently if it's done in the Prime Minister's Office, the RCMP say it's not a problem."