The hopes of cash-strapped Lambeth council tenants for a Government bailout to reduce huge rent increases have been severely dented - despite a desperate plea in parliament from the borough’s MPs.

Vauxhall MP Kate Hoey - supported by Streatham MP Keith Hill and Dulwich and West Norwood MP Tessa Jowell - asked for a £11m payment to plug the hole in Lambeth’s housing revenue account which has resulted in a 17 per cent rise in rents since April - the biggest increase in the country.

The maverick MP’s plea on April 24 was part of a scathing attack on the mismanagement of the council’s housing finances in which she said tenants should not have to bear the brunt of the council’s mistakes.

The rent increases represent an extra £12 a week on average to Lambeth tenants - which many are struggling to pay.

Yet Housing Minister Margaret Beckett said council leaders’ request for the one-off payment could not be met - because of “the problems that could be caused if Lambeth was treated differently”.

Lambeth had hoped the £11m could be given as a replacement for funds the council missed out on in 2006/7 and 2007/8 because of the way its rent and service costs were restructured.

The council is still hopeful to receive a Government subsidy to reduces its rents.

But the subsidy is expected to be nowhere near the £9m required by Lambeth to cut its rent increases to around the London average of 6 per cent.

Miss Hoey said in 20 years as an MP, housing management had been “the one overriding theme of discontent and even anger”.

She said there had been “a culture of incompetence, arrogance and — I choose my words carefully — outright corruption among too many in the structures of the housing department”.

Tenants need the Government bailout to reduce their rents because they are “one group throughout all this who certainly cannot be blamed,” she added.

The council’s cabinet member for housing and regeneration Lib Peck said she accepted Miss Hoey’s criticisms of housing but blamed the previous Lib Dem and Conservative administrations for missing out on the £11m.

She said the decision to increase rents was because Labour had the “desire to put historic problems right”.

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