The National Audit Office discovered that the deal cost the taxpayer pounds 3.6m. Scottish Homes, a government-funded body which sold the houses to Waverley Housing, lost pounds 2.5m under a management contract and pounds 1.1m on a loan to the company for improvements. Michael Ancram, the Northern Ireland minister and former Scottish Housing Minister, was chairman of Waverley Housing.
MPs were told that he joined after negotiations started and resigned before the sale. He became chairman after losing his Edinburgh South seat in the 1987 general election. He now represents Devizes in Wiltshire.
The management contract was awarded without competition and the amount spent on maintenance and improvements was three times greater than local councils spent previously.
Management costs soared from just over pounds 200 a house a year to more than pounds 600 when Waverley took control in 1989. MPs were told that was because the company provided a 'different and improved' service to tenants in the Roxburgh and Etterick and Lauderdale districts.
The sales were the first in the drive to reduce local authority controlled housing. Alan Williams, Labour MP for Swansea West, accused three men - Robert Johnson, John Jenkinson and Steven Scott - of exploiting their positions as housing and finance officials on Roxburgh District Council to secure the deal. He said they negotiated secretly with the Scottish Office and had discussions with an official from the Downing Street Policy Unit.
The negotiations were discovered after someone on a Youth Training Scheme checked a discarded computer disc in a Roxburgh council cupboard.
Robert Maclennan, Liberal Democrat MP for Caithness and Sutherland, said the three had a 'direct hotline' to government policy but the committee was told that an inquiry by Malcolm Rifkind, then Secretary of State for Scotland, found civil servants had acted properly. Peter McKinlay, chief executive of Scottish Homes, denied the three obtained the 'inside track' on government plans.
The policy was 'novel' and when management bids were invited there were not enough experienced companies. A higher offer was received after the closing date. Scottish Homes had now improved the sales system.
Twenty-nine per cent of voters - and 7 per cent of Tories - believe the Government is corrupt and abuses power, according to an ICM opinion poll in the Guardian today. However, 48 per cent of all voters think it is no better or worse than other governments.
State of sleaze, pages 8, 9
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