Lambeth corruption suspicions 'were reported nine years ago'

DISQUIET over the operation of council contracts in the Labour- controlled south London borough of Lambeth was voiced as long ago as 1984, it emerged yesterday.

After an all-night meeting of councillors that ended at 5am yesterday, the borough announced an inquiry into corruption and malpractices that are estimated to have cost it pounds 10m. But eight years ago, Robin Pitt, leader of the Conservatives on the council until the previous year, reported to the police a contract issued to a building contractor for pounds 3,000, which was expanded without further competitive tender to pounds 250,000.

No action apparently followed the police investigation. At the time, a spokesman for the council said that standing orders allowed contracts to be awarded with less strict procedures if the amount was under pounds 5,000. In this case the council had been happy with the initial carpentry, and had been prepared to extend the work to the refurbishment of a whole housing estate.

The borough, which has the highest poll tax in the country - pounds 425 a head after capping - announced the public inquiry after a 118-page report by the council's chief executive, Herman Ouseley, on an internal inquiry put the cost of corruption and malpractices at pounds 10m at least.

The public inquiry will be conducted by Andrew Arden QC.

Mr Pitt, who headed a brief Conservative administration in the borough in 1982, resigned as a councillor in 1984 for unconnected personal reasons, and now works as a prison officer in Worcestershire. He said that, as opposition leader, he was allowed to see contracts which had been awarded. In many cases, initial small contracts had been expanded. Although not necessarily corrupt this had rung alarm bells.

'I am surprised it took so long for the scandal to come out,' Mr Pitt said yesterday.

The chief executive's report is a catalogue of abuse of procedures involving civil engineering and housing repairs and maintenance. It says large amounts were spent on highways without the council committee's approval, making the work unlawful. More than 200 staff were made redundant, or retired early, at a cost of pounds 1.8m, 'without any authority at all'.

The report says that retrospective approval could not be given for much of the unlawful expenditure, and 'major issues of negligence and/or wilful misconduct for individual officers arise'.

During the meeting, the council leader, Steve Whaley, survived a no-confidence motion by just one vote.

The councillors had heard officials admitting that work contracted to the direct labour force was not done; double invoicing was used; and contract prices for jobs were vastly exceeded.

The present Conservative leader, Hugh Jones, said he believed that the amount of money involved in the malpractice and corruption could be even higher than the pounds 10m already identified.

Mr Ouseley conceded that the failure to curb corruption over a 10-year period had extended to the top of the council.

He said: 'The criticisms, allegations and failures are due in my view, in some way, to the corporate failings of the organisation through the legal, finance and top management including myself.'

Scotland Yard's fraud squad has been contacted about the claims. Police are also investigating reports that council officials who carried out the internal inquiry were warned off with threats to themselves and their families.