Fraud, corruption and incompetent management had become endemic during 15 years of Labour control as the party's councillors concentrated on battles with the Government, said the report by Elizabeth Appleby QC, which the council comissioned two years ago.
She concluded: "Lambeth is in an appalling mess. The financial control of Lambeth is such that vast amounts of money are wasted and in consequence services are severely prejudiced."
Miss Appleby's report condemned Labour's rule in the borough, but although she pulled few punches in general, she named no individuals responsible and there are no plans for prosecutions as a result of her investigation.
She said that Lambeth's difficulties could be traced back to the late 1970s and early 1980s when the "ruling party was intent on obstructing the implementation of government policy in a number of areas.
"Lambeth's policies and actions of the Eighties and early Nineties have been the contributing factor in creating the perfect atmosphere for abuse of the system by persons working within Lambeth and outside.
"The failure to deliver proper services is nothing to do with under-funding, it is due to Lambeth's mismanagement of its funds."
Among her specific criticisms were:
t Building projects: Labour was mainly interested in avoiding compulsory competitive tendering and ensuring that its own direct labour organisations got the work. The losses "are of such proportions that they do have all the hallmarks of fraud".
t Fraudulent handouts: 400 to 500 council officers were receiving fraudulent housing benefit and income support claims. Even in clear cases of fraud, action was not taken.
t Revenue collection: "It does appear that in the Eighties and early Nineties, Lambeth operated an unwritten policy not to collect its rates and taxes and not to collect rent and the failure to collect continues. As at October 1994, if one takes account of the arrears of council tax, community charge, rates, non-domestic rates, debts, housing rents, temporary accommodation and mortgage arrears, Lambeth is owed over pounds 200m."
t Finances: "The financial state of Lambeth can only be described as appalling ... until recently Lambeth failed to meet its statutory duty to publish a statement of accounts within nine months of the end of each financial year."
The report, which cost over pounds 100,000, recommended competency assessments for all managerial staff and the sacking of anyone not up to their job. Much of the responsibility for cleaning up Lambeth rests with Heather Rabbatts, the new chief executive of the borough.
She has been given sweeping authority, making her the most powerful official in local government in a council where no party now has an overall majority.
She said yesterday: "The report outlines a catastrophic litany of mismanagement and, in some cases, fraud. The events which it describes amount to a betrayal of the people of Lambeth.
"I am concerned that the report specifically covers allegations of serious fraud previously estimated to involve over 400 staff.
"Since then the council has adopted a policy to have any proven culprits dismissed, which has resulted in disciplinary action in over 100 cases, including 90 prosecutions."
While no prosecutions were expected to arise out of the Appleby report, fraud squad detectives said last night that they had been investigating other allegations in a parallell inquiry which could end in arrests.
Who was to blame? Page 17
HOW THE CRISIS DEVELOPED
1978 Labour administration under Ted Knight took over.
1985 32 Labour councillors surcharged and disqualified for delaying setting a rate in protest at rate-capping.
1986 New Labour administration elected. Launched investigations into overcharging by subcontractors.
1987 Internal inquiry into construction services revealed breaches of procedure, poor management control and large cost overruns.
1988 Investigation into housing maintenance found high rate of unsatisfactory repairs.
1990 Labour won 40 out of 64 seats and continued in power.
1991 13 Labour councillors suspended from the group by the party for political reasons. Labour formed minority administration.
1992 District Auditor made 120 recommendations for improving financial management.
1993 Damning report on the council's problems by Herman Ousley, then the Chief Executive.
1993 Elizabeth Appleby QC appointed to investigate the council's affairs.
1994 Labour defeated in elections leading to a hung council.Reuse content