The National Audit Office, a public spending watchdog, found that Quarry House in Leeds was built to house 2,100 staff from the departments of health and social security, but it was found to be too small because the design failed to provide sufficient space for plant and machinery.
As a result, staff are now being housed in converted office space in the roof of the flagship office block, and a second office is being rented in Leeds at a cost of pounds 705,600 a year.
The staff were encouraged north by the prospect of a staff restaurant, nursery, swimming pool, sports hall, fitness room, two squash courts and a bar.
However, in addition to being housed in the cramped space, they also complained about defects which are still being corrected, three years after the last of the staff arrived. The defects included the failure to provide double glazing. They were given single glazing, which the staff complain is too hot in summer and too cold in winter.
The local Labour MP, Derek Fatchett, accused the two departments - run by Virginia Bottomley, then Secretary of State for Health, and Peter Lilley, Secretary of State for Social Security Secretary - of "getting their sums wrong".
After renting overspill accommodation, they laid off staff, leaving them with excess office space, he said. Mrs Bottomley scrapped the health regions, reducing the number of health staff in the NHS executive at Quarry House.
"This is a clear case of the right hand not knowing what the left is doing. While people were moving their families up to Leeds at [total] a cost of pounds 12-13m, Virginia Bottomley was planning substantial job cuts."
The NAO said the building was built within the budget, and savings on London property were expected to total over pounds 15m. Its report on Quarry House is expected to lead to an inquiry by the Public Accounts Committee of the Commons.
5 Construction of Quarry House, by the Comptroller and Auditor General. HMSO pounds 9.15Reuse content