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Political Correspondent

Wandsworth council in south-west London has acted unlawfully since 1983 in selling empty council houses without taking into account its statutory duties to the homeless, the District Auditor said yesterday.

The finding is a fresh embarrassment for the Conservatives and for Sir Paul Beresford, a junior environment minister, who was leader of Wandsworth, the Tories' "flagship" privatising council, from 1983 to 1992.

Peter Hain, the Neath MP and a Wandsworth resident, whose complaint helped trigger the inquiry, called for Sir Paul's resignation. It was, he said, "quite inconsistent" for someone who had acted unlawfully to be a minister. Frank Dobson, Labour's environment spokesman, said the fresh example of "Tory law-breaking" showed both London flagships, Westminster and Wandsworth, to be "rotten to the core".

The district auditor's inquiry found "a relatively high correlation" between housing expenditure and the five most marginal wards in Wandsworth between 1987-88 and 1990-91 - the period when the Conservatives turned a one-seat majority into one of 35 in the 1990 local authority elections.

The report says examination of committee reports and criteria used to choose the estates revealed "no evidence" they had been chosen to gain party political advantage - the charge of gerrymandering that has been levelled against Westminster.

The report says, however, that no notes or formal records are available for the chairman's group meetings, when the voluntary sales policy was introduced in 1983-84, although later records, when the policy was extended in 1992, show no evidence of "improper purpose".

But in preliminary findings, Rowland Little, the auditor, says the council acted unlawfully in selling empty council houses instead of offering them to the homeless. Wandsworth's legal advice disagrees and only a court case would resolve the issue. But Mr Little says as he has "seen nothing to suggest that any member or officer did not believe in the lawfulness of the council's actions" he has decided against a court case because the costs would outweigh the potential gain to local taxpayers.

Since 1978, when the Conservatives took power, Wandsworth has sold 19,000 homes, most under the right-to-buy, but 8,000 of them, voluntary sales of empty properties.

The council has raised £450m, claiming to be one of the highest spenders on housing in London. But its housing stock has halved while its waiting list and homelessness have risen.

As the housing was sold, households accepted as homeless shot up from just over 650 in 1983 to nearly 1,500 in 1990. The number in temporary accommodation jumped from just over 100 in 1983 to 1,400 in 1992. Shelter, the charity for the homeless, said families were having to stay far longer in temporary accommodation while council-tax payers footed the costs of temporary housing.

Mr Little said the council was required to demonstrate that it was able to discharge its statutory duties before selling empty homes. "It is not entitled to strike a balance between a need to promote home ownership and the needs of those homeless households to whom the council owes a duty."

A decision in 1992 to designate a further 3,166 dwellings for sale may have been unlawful, he ruled. The policy was modified in 1994, on legal advice.

Sir Paul Beresford held his counsel, but Edward Lister, the council leader, said: "I don't believe there is anything embarrassing in this. There is no question of gerrymandering, there is no question of wilful misconduct. There was a disagreement with the auditor over housing law."

Tony Belton, Wandsworth's Labour leader, said the report "confirms our long held view that they have put political dogma ahead of housing needs". Labour had never accused Wandsworth of Westminster-style gerrymandering, he said. The sales policy had been aimed at changing the political make- up of a whole borough, not individual estates, he added.