Progressive Conservative Leader Tim Hudak has fired his finance critic, Thornhill MPP Peter Shurman, for taking a $20,719 housing allowance from taxpayers last year.

Shurman, a former talk radio host who represents a suburban riding bordering Toronto’s Steeles Ave., but moved to a $660,000 home in Niagara-on-the-Lake and claimed the allowance for an apartment near Queen’s Park where he stays while working at the legislature.

Hudak said in a statement Sunday night that controversy over the payout — which was not strictly against regulations — was becoming a distraction for his party and its message of respect for taxpayer dollars.

A source said Hudak’s meeting with Shurman to discuss the allowance Sunday turned into “a very heated exchange” with the leader asking his MPP to repay the housing allowance, which Shurman refused.

The source said Hudak was aware Shurman was moving to Niagara-on-the-Lake but did not know the Thornhill MPP was claiming the housing allowance.

Shurman declined to comment when asked about repayment.

The Conservatives — and in particular, Shurman, as finance critic — have been slamming the Liberal government for its $11.7-billion deficit and for spending $585 million to scrap power plants in Oakville and Mississauga before the 2011 election.

“While the current rules were followed, it is clear taxpayers hold elected officials to a higher standard and those rules need to be changed,” Hudak said Sunday after meeting with Shurman.

“I believe we have a responsibility to taxpayers to operate in their best interest. As a demonstration of my commitment to this principle, I have made the decision to remove Peter Shurman from his position as finance critic,” said Hudak.

”Our party’s top priority is, and will continue to be, holding the Liberals to account ... this is our focus and deserves our full attention.”

In an email statement, Shurman said: “I followed the rules. I own one home only. I am very satisfied that my life is one of total integrity.”

A spokeswoman for Hudak said a new finance critic will be named within days.

After concerns were raised about the Shurman housing allowance last week, both the Liberals and Conservatives agreed there should be an end to a “loophole” that allows MPPs to claim money for lodging when they live more than 50 kilometres from the legislature.

In Shurman’s case, he chose to move to Niagara several years ago while representing Thornhill, in Toronto’s northern suburbs, and collected the subsidy usually associated with MPPs who represent ridings outside the Toronto region.

“(The Shurman case) clearly goes against the spirit of the allowance,” government House leader John Milloy said Friday, urging the legislature’s board of internal economy to review the policy so that only MPPs from ridings a “burdensome travel distance from Queen’s Park” are eligible.

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The loophole needs to be “fixed immediately,” Tory caucus chair Sylvia Jones said Friday. NDP Leader Andrea Horwath also said she’s open to a review.

MPPs are not required to live in the ridings they represent.