THE fraud case against the Labor MP Craig Thomson is effectively dead after advice from the NSW fraud squad that there is insufficient evidence to prove allegations he spent more than $100,000 on prostitutes, election campaigning and personal expenses.

The advice, sent to senior police yesterday, calls for the matter to be referred to Victoria Police - as any offence would have been committed there - but says they are unlikely to reach a different conclusion.

Off the hook ... police say there is not enough evidence to charge federal minister Craig Thomson. Credit:Andrew Meares

The news will be welcome in the Labor Party, which has struggled with dire opinion polls and a series of policy missteps.

Mr Thomson allegedly misused his Health Services Union credit card when he was its national secretary before entering Parliament in 2007. It is alleged he used more than $100,000 in union funds on prostitutes, general expenses and his election campaign.