The following correction was printed in the Observer's For the record column, Sunday May 31 2009

In the article below we said incorrectly that a debate between Farage and former Europe minister Denis MacShane was "discreetly taped" by the hosts, the Foreign Press Association. The FPA openly records all its briefings and in most cases puts them on its website after the event.

The leader of the UK Independence party (Ukip), which wants to lead Britain out of the EU, has taken £2m of taxpayers' money in expenses and allowances as a member of the European Parliament, on top of his £64,000 a year salary.

Nigel Farage, who is calling on voters to punish "greedy Labour, Conservative and Lib Dem MPs" at the European elections on 4 June, boasted of his personal expenses haul at a meeting with foreign journalists in London last week.

The admission threatens to flatten a bounce in the polls for Ukip that has seen the party climb to around 17% over the last fortnight as angry voters flock to smaller parties regarded as untainted by the Westminster expenses scandal.

During a debate about Europe at the Foreign Press Association - which was discreetly taped by the hosts - Farage was asked by former Europe minister Denis MacShane what he had received in non-salary expenses and allowances since becoming an MEP in 1999.

"It is a vast sum," Farage said. "I don't know what the total amount is but - oh lor - it must be pushing £2 million." Taken aback, MacShane then joked: "Is it too late to become an MEP?"

Farage insisted that he had not "pocketed" the money but had used the "very large sum of European taxpayers' money" to help promote Ukip's message that the UK should get out of the EU.

When asked later by the Observer to justify how he could claim so much while running a campaign attacking Westminster MPs for their extravagance, Farage was unapologetic, saying that, while MEPs were "very expensive", he was entirely happy that the money had been used for the best of causes."

Last night, as Ukip circulated new party literature saying Westminster MPs had "ripped off taxpayers", Farage, who employs his wife to help run his office and pays her from his allowances, faced a backlash as opponents accused him of hypocrisy. MacShane suggested that Ukip's attempt to pose as more honourable on expenses than other parties had been exposed as shameless and hollow.

"Far from being the party of the little man in Europe, Nigel Farage's astounding £2m raid on the taxpayer shows he is up there with any other politician, happy to line his pockets with gold," he said.

Ukip's opponents now hope the admission will halt the party's advance which Farage's supporters believe could see it overtake Labour and secure second place in the European poll.

At the last European elections in 2004, Ukip enjoyed its greatest success, installing 12 MEPs in the European Parliament after securing 16.1% of the vote.

But the success rapidly turned sour as one of the dozen, Ashley Mote, was expelled from the party - and later jailed - for benefit fraud. Another, Tom Wise, is now facing prosecution for alleged false accounting and money laundering relating to his EU expenses. He denies the charges. Television presenter Robert Kilroy-Silk, who won the East Midlands for Ukip, later left to form another eurosceptic outfit, Veritas.

With the pressure on all parliamentarians mounting, Farage insisted on Friday that from next month all his MEPs would publish their expenses online. "From the moment any Ukip members get elected, all elected MEPs will provide a clear and traceable quarterly statement of their expense accounts," he said.