BURNLEY'S ruling Labour group appeared in turmoil today after a revolt by more than a third of its councillors.

They defied party whips and failed to back the setting up of a "Star Chamber" panel to probe council house queue-jumping allegations against three councillors.

Many walked out of the town hall before last night's special council after a stormy private meeting of the Labour group.

Today council leader, Kath Reade said their absence would be investigated but declined to speculate on possible action against them.

But she gave notice that the new investigatory panel - approved by a massive 30 votes to three margin despite the absentees - would go beyond investigating the activities of the Labour councillors named in a five-month inquiry by chief executive, Roger Ellis, for allegedly helping people leapfrog the housing list.

Other un-named councillors against whom allegations had been made by anonymous council housing staff could also be probed by the new all-party body, she told the council.

"You cannot start the healing process until you lance the boil," she said.

Councillors also ordered a major improvement of housing management by staff - criticised in the Ellis report - to ensure that council policies are implemented in future. And they voted for a full review of housing allocation to ensure objectives are being met.

In an often bitter debate one of the named councillors, Jack Alston, - who has quit the Labour Party over the issue - demanded an apology from Labour chiefs whom he said had accused him of a "serious criminal act." He threatened to sue if they did not.

Another named Labour member, Eddie Fisk left after protesting that for the first time the council had failed to mark the service of a former councillor and ex senior officer who had died recently.

"Have we come to the point where we cannot even honour the dead?" he asked.

Liberal Democrat leader, Gordon Birtwistle, said the council was witnessing the Labour Party cutting itself to pieces and backed party members who, he said, had voted with their feet to stay away rather than bend to "Labour's bully boy tactics."

He admitted he had put pressure on housing staff to find homes for people in great need and would continue to do so. That is all the named councillors had done and they were right to do so, he added. He said the real finding of the report was that there was "gross mismanagement of council housing by staff" and he would have no truck with the "kangaroo court" panel being set up "to pillory caring councillors."

Independent, Harry Brooks, called the report "astonishingly unbalanced" and said Mr Ellis and other senior mangers should take a large share of the blame for "gross management failure."

Anonymity for staff making accusations had resulted in them "using the opportunity to tell barefaced and malicious lies with impunity".

The inquiry, he estimated, had cost £50,000 and had merely highlighted the fact that for years housing in Burnley had been run in an "unsound, unbusinesslike and shoddily inefficient way."

He would do nothing to legitimise a star chamber aimed at settling personal and political scores, he said.

Mrs Reade said the report showed there had been unacceptable behaviour. "We will see this through and are determined the people of Burnley will get the best possible behaviour and fair housing allocation.

The report was not unbalanced, it was honest, she said.

Coun Birtwistle's admission that he too was "bending the rules" was "unacceptable" and some of Coun Brooks' comments were "horrendous," she said.

"They underline the fact there is a very real problem and we are right to take this very necessary action," she added.

Mr Ellis said the council had to operate on clear, considered and democratically-agreed policies and democracy demanded that clear policies were adhered to.

The report, he added, was necessary and the cost would probably have been higher than Coun Brooks' £50,000 had outside bodies been brought in to carry it out.

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