Police and councils in north London fear proposed deregulation of cafe opening hours will harm the fight against drug dealers and prostitutes.

Operation Welwyn, run by police and the Labour-led councils of Camden and Islington, has flushed out crack cocaine and heroin dealers in the King's Cross area and targeted prostitutes on the streets around the railway station.

Local authorities fear the Government's Deregulation Bill, which had its second reading in the Lords on Monday, will strip them of their power to regulate cafe and restaurant opening hours. At prersent they are only licensed until 1am.

Geoffrey Bateman, a spokesman for Camden Council, said the late-night eateries are a favourite haunt of drug dealers. 'If the police turn up to a cafe and everyone's drinking cappuccino it's very difficult for them to make an arrest. The 'time-out' period in the early hours when everything is closed ensures no one has an excuse to be in the area.'

Chief Inspector Paul Hoare, from the Operation Welwyn team, believes the passing of the Bill could be disastrous. 'If this bill goes through in the form I understand it, it could mean a serious set-back for the operation,' he said.

'There would be a likelihood that the drug dealers would descend on King's Cross again. If you go there now you will find it very difficult to buy crack or heroin.'

Chief Inspector Hoare said out of 2,000 arrests made near the station during 1993, one third were of suspected dealers.

Mr Bateman added that the success of Operation Welwyn has hinged on the regulation of opening hours. 'The Government doesn't realise that this closure of cafes at 1am has been a vital weapon in the fight against the drug trade,' he said.

Operation Welwyn has been running for 18 months and appears to be winning the war against drug dealers in one of Britain's most notorious areas. It was set up to combat the cycle of crime infesting King's Cross, where drugs and prostitution frequently go hand in hand.

Undercover officers made 86 separate purchases of crack priced between pounds 25 and pounds 50 per rock in a 13-day period over Christmas last year which led to 38 arrests.

Chief Inspector Hoare said when the operation began there were up to 60 crack and heroin dealers working the area immediately by King's Cross station at any one time. Some were earning more than pounds 2,000 a day.

The leader of Camden Council, Richard Arthur, has called on the Government to add an amendment to the Deregulation Bill enabling local authorities to retain the power to regulate cafe and restaurant opening times. He has written to the Home Secretary, Michael Howard, asking him to change the Bill 'in the interest of community safety'. He also hopes win peers' support.

He said: 'I hope the Government isn't going to snatch a key weapon from us in our fight with the drug barons of King's Cross. We have made the area safer and this is important for the thousands of people who live and work there.'

For Raffaela Novi, proprietor of Casa Mamma on Gray's Inn Road, the Deregulation Bill is a direct threat.

She said yesterday she was furious at the prospect of cafes and restaurants staying open all night. 'After midnight you get no good people here,' she said. 'Just last night a man ran into and started asking about the trout on the menu. But he knows it's fish. He didn't want to eat. He was escaping from someone, or the police - I could tell. And a few weeks ago this man came in here with the police chasing after him. He asked for a coffee and then the police couldn't do anything.'

Mrs Novi has lived above her restaurant, directly opposite the station, for 28 years. She has seen the area change significantly. It used to be a pleasant, lively place but now she sees nothing but degradation and fear. 'It's very bad. It's not safe. I used to have a lot of customers, but now business is not good, just a few regulars.'

She backs the police and the council in their fight to amend the Bill. 'It will be a disaster,' she said. 'If places are able to open all night then the bad people, the drug dealers, will go there and be safe. The police are very good but they will not be able to do anything.

'Midnight is late enough for any restaurant to stay open. I don't want the bad people coming in.'

However, not all restaurant and cafe owners near the station are against the Bill. One man, who insisted on remaining anonymous for fear of reprisals, said much as he despised the drugs trade, businesses should be given the option of opening all night.

'It's a choice between money and safety. If people want to make a few more bob by staying open later they should be allowed,' he said. 'Personally I don't want to take the risk. What's money if you have a nervous breakdown because drug dealers are using your shop?'

His neighbour in a hamburger bar says he knew dealing went on inside cafes but said owners had to make a living. 'It's recession - and everybody's poor. If they want to stay open they should be let to do so to make more money.'

Proprietors in King's Cross said they had noticed a decrease in the drug trade, but that the dealers were still active.

One said: 'They are everywhere. In the cafes, on the streets, in the schools - I see them every day. It's still very bad here.'

(Photograph omitted)