'Dodgy deals' down Petticoat Lane: A 300-year-old market is dying because of a steep rise in rents. Jane Martinson reports

On Sundays, when Petticoat Lane street market traditionally attracted busloads of bargain-hunters, there's no longer a crush around the man who sells slicing gadgets for 'under a tenner with a five-year guarantee. There's no longer a crush around any stall; rickety wooden stalls stand forlorn and empty during market days.

The man who sells underwear six days a week said he had never seen anything like it. From where he stands he can see 20 pitches where 'regulars have given up the fight against the recession, the seasonal trade and, most of all, against the rent rises of almost 100 per cent in less than a year.

The London Borough of Tower Hamlets, Liberal Democrat-controlled for eight years until this month's local elections, said the rent rises were necessary to make up a deficit of more than pounds 1m in the street trading account. It argued that the money was needed for street cleaning. Traders talk about paying for road cleaning in Stratford, five miles away.

For all its cleaning, Tower Hamlets still has some dirty linen to be aired. A two-year inquiry by the District Audit Office into corruption in Tower Hamlets' street markets is to be released shortly.

Illegal trading in a market where stall-holders could reputedly earn pounds 1,000 a week has long been endemic. Offering inspectors and the powers-that-be a 'drink is an accepted part of market etiquette. The inquiry was set up when it became apparent that such behaviour was just the tip of an iceberg. In 1990 an investigation into corruption landed three market inspectors in court. Two were found guilty of accepting bribes.

The council ordered an inquiry into the allocation of stalls and the illegal practice of subletting. It was headed by John Hendy QC, an employment law expert .

His report, completed in 1992, discovered widespread subletting in the markets. It reported allegations and counter-allegations and concluded by accusing the council of 'deep rooted and systematic corruption.

It found that Betty Wright, a leading Liberal Democrat councillor, was illegally subletting a pitch in Petticoat Lane under the name of her 'aunt, 79-year-old Hetty Hart. This illegal activity was condoned by senior councillors, it added.

It strongly criticised John Snooks, chairman of the all-councillor markets panel, and accused him and the mayor, Jeremy Shaw, of helping Mrs Wright keep her pitch. It said that Mr Shaw had instructed Richard Ward, a former chief executive who had led the anti-corruption campaign, not to oppose Mrs Wright's appeal against the revocation of her licence. The markets panel was accused of 'nurturing a culture of lawlessness. The report demanded 'prompt and decisive action so that, among other things, those who have cynically abused their positions are no longer able to do so.

Mr Snooks accused the authors of the report - which had cost the council pounds 29,000 - of talking only to officers and not 'local people.

The report was sent to the Director of Public Prosecutions and the District Auditor at the end of 1992. The CPS did not bring any prosecutions and Mr Snooks became mayor last year.

Because of last year's rent rises and special teams of inspectors charged with cracking down on illegal traders, tension between the council and street traders has heightened.

'They're trying to kill the Lane, a number of traders said. They are afraid that the 300-year-old market does not fit the new East End image of Canary Wharf and riverside properties - especially as it sprawls across prime development land next to the City.

They also claim that individuals are being victimised and point to the case of Terry Smith, who had worked in the Lane for 13 years before being allocated the stall which had been subletted by Mrs Wright in 1991.

The Hendy report details how the council attempted to revoke Mr Smith's licence and reallocate it to Mrs Wright. He took his case to the High Court to win the right to his licence. Mr Smith claims to have been constantly harassed since the day he was allocated a stall previously worked by a councillor. 'Since I came to this stall, the council has driven me mad. Sometimes I think there must be an oil well under this pitch, the council are so keen to get hold of it.

A council spokesman said: 'Mr Smith is one of a large number of traders whose licence we are looking to revoke because of absenteeism. We are certainly not targeting him.

Just three weeks after the Hendy report the markets panel was disbanded and an independent panel of lawyers set up to decide on licence revocations. They have been meeting regularly since early this year to deal with the backlog of claims against traders. Out of 600 cases of allegedly illegal trading, 93 licences have been revoked and another 200 are being considered. The number of licences allocated in the last three years is estimated at just 22.

The council were unable to provide exact figures but a spokesman said the small number was due to the freeze on allocations between January 1991 and last July. The fall in the numbers on the licence waiting list is due, he said, to the recession, rent rises and the clampdown on subletters.

Barry Barnett, vice-chairman of the Tower Hamlets Combined Street Traders' Association, said: 'I worked down the Lane for 20 years before I got a pitch in Goulston Street (one of the main streets which make up Petticoat Lane). When I got here I could have had my pick of any number.

'How are they going to pay off this deficit with so few traders?

At the local elections this month, Mr Snooks, Mr Shaw and Mrs Wright all failed to be re-elected as Liberal Focus candidates. The Liberal Democrats saw their majority of 29 seats disappear and they were left with just seven seats. The Labour Party, after eight years in opposition, gained 43 out of the 50 seats.

The new council leader, John Biggs, is taking legal advice on whether the council can reverse a 61-per-cent rent rise, which came into effect last December, by extending the pay-back period on the deficit. He also wants an investigation into the deficit.

'We want to know how the council claimed to be balancing the books for years and then suddenly went pounds 1.5m in deficit . . . We believe traders have been treated shoddily and questions remain to be answered, said Mr Biggs.

Such soothing words may be typical of a party long in opposition and only a few weeks in power, but they offer some hope to traders.

Julie Richards, whose family has sold watches in Middlesex Street for 100 years, said that things can only get better. 'Perhaps this new group will talk to the traders. Whatever, something really has to be done.

'This market is a landmark. Tourists get off the plane at Heathrow and ask to see Petticoat Lane, the world-famous market. Now, they come here and say: 'Is this it? Is this all there is?'

(Photograph omitted)