A Birmingham-born former Tory peer accused of lying about his expenses told a court he viewed the system as being "in lieu of salary".
Lord Taylor - full name John David Beckett Taylor - is accused of claiming for travel costs between a home in Oxford and the House of Lords, when he actually lived in the capital. He denies dishonestly claiming £11,277.
He told the jury at Southwark Crown Court that he had acted on advice from Lord Colwyn that he should state his address as being outside of London.
Lord Taylor said: "It was in lieu of salary because there was no realistic prospect - because of the image of the House of Lords - of lords being paid. The policy was to claim the maximum because the reality is, in terms of expenditure, you were spending far more than you were able to claim back. This was a contribution towards your costs."
He answered "no" when asked by Mohammed Khamisa QC, defending, if he had ever made false claims for allowances or been in trouble with the police. Mr Khamisa asked him how he learned about the system for claiming expenses in the House of Lords.
He said he remembered being given some very brief verbal advice and a guidebook, but he relied on speaking to other members.
Lord Taylor said: "We were told about the various categories and you discussed those things with the other peers." He said it was made clear to him that expenses were not seen in the typical sense, when people are paid back money they have already spent.
The former Tory peer said: "They were actually allowances. It was very different to the House of Commons, because there you were paid, but in the Lords you were unpaid. I very quickly got the impression that they were allowances in lieu of salary."
He spoke about a conversation he had with Lord Colwyn in 2003 with regard to having an address outside London. "He said it was perfectly acceptable, but he did stress you have to have a family connection," said Lord Taylor. He added that Lord Colwyn was "paternalistic" towards him.
Lord Taylor told the jury that his colleagues in the Lords did not believe they were misusing the expenses system. "Not for a moment did I think that they thought they were doing anything wrong because they weren't that type," he said.
Lord Taylor, 58, of Lynwood Road, Ealing, west London, is on trial facing six allegations of false accounting on various dates between March 2006 and October 2007.
The prosecution says he wrongly claimed for travel as well as night subsistence. The trial was adjourned to Friday, when the peer will continue to be cross-examined.