Why did a needy council spend thousands on a one-hour meeting in Amsterdam?

Brent debacle: Report reveals how one section of a Tory-controlled council lost pounds 400,

The recruitment section of Brent Council, north-west London, lost pounds 400,000 of public money, including thousands to hold a staff meeting at Schipol airport, Amsterdam, according to an independent report.

Labour is demanding that the district auditor investigates Ad Shop, the arm of the north London Conservative-controlled council responsible for placing advertisements and recruiting staff. Labour says that, if necessary, councillors should be surcharged.

The Opposition is also seeking the head of Bob Blackman, the present leader of Brent Council. They claim he tried to prevent an independent report into the debacle being discussed in public and maintain he should resign from the council and stand down as Tory candidate for Bedford.

An independent report commissioned by the council stated that Ad Shop lost pounds 400,000 of the council's money. Set up three years ago and wholly owned by the council, Ad Shop was wound up in February this year. The report, prepared by a former police officer, Derek Owen, found that pounds 23,800 was spent on alcohol, lunches and flying 14 people to Amsterdam for a one-hour staff meeting in the airport's VIP lounge.

Ken Livingstone, MP for Brent East, has tabled two Commons early-day motions also signed by Brent South MP Paul Boateng, highlighting his concern at events at Ad Shop and the Owen report, which, Mr Livingstone claims, the council has tried to suppress.

Mr Livingstone alleges in the motions that Mr Blackman insisted the Owen report be discussed in closed session, hired Securicor to distribute it, and ordered councillors to sign an undertaking not to show it to anyone. "The report is printed on bright red paper so that it cannot be photocopied. To be doubly certain, every sheet of the report, which is several inches thick, has the name of the councillor receiving it woven into the paper," said Mr Livingstone.

The motions, together with a speech he made to MPs in the Commons chamber debating the Second Reading of the Audit Bill, describe the latest controversy to hit Brent. The losses were covered up, claims Mr Livingstone, because Richard Buckley, the chair of the Brent Business Board, the body that oversaw Ad Shop, was having an affair with Ruth Jackson, Ad Shop's director. Mr Livingstone alleges that Mr Buckley "had a clear and substantial non- pecuniary interest . . . and used his position to prevent these losses coming to light".

The Owen report says the affair began in October 1993 and was reported by Mr Buckley to the council's chief executive, Charles Wood. Mr Livingstone is demanding to know if Mr Wood reported the affair to the council leader and if he advised Mr Buckley to stop chairing Brent Business Board meetings.

Thirteen Ad Shop workers lost their jobs following the losses but, Mr Livingstone says, Mr Buckley intervened to pressurise the council official John Walker, to raise Ms Jackson's redundancy payment by pounds 6,700.

The Owen report questions the legality of this pay-off and draws it to the district auditor's attention. The report also recommends the district auditor investigate the specific loss on the trip to Schipol. "We can only imagine if Lambeth council had done that," said Mr Livingstone. "Conservative members would have been very unhappy."

Ad Shop's fall, concludes the Owen report, was brought about by ideological zeal. A drive to privatise many of Brent's functions by breaking the council organisation into 170 business units, including Ad Shop, was flawed by "the failure . . . to implement a sound infrastructure in support of the business units from inception, coupled to an almost total lack of positive or effective monitoring". This, Owen says, was "the primary cause of the Ad Shop's demise and subsequent closure".

A spokeswoman for Brent council said yesterday: "We can't comment because the Owen report has not yet been made public." She added that the council would decide soon whether to publish it.