RENT arrears owed by former tenants to a council slated by inspectors rose by a staggering 1,300 per cent in six years.

The Government is poised to send in managers to take over the housing department at Labour-run Chester-le-Street District Council, in County Durham.

The move follows a damning Audit Commission report that found "very serious" failures and warned of possible service cuts.

The council's debt recovery and management, housing benefit advice to tenants and failure to set aside sufficient money to write-off "bad debt" are criticised in the report.

The council, one of the country's smallest, has 5,300 houses, but is owed a total of £641,000 in unpaid rent - equivalent to £120 per house.

In 1995/96, the council was owed £20,000 by former tenants, but this rose to more than £255,000 in 2001/02.

Current tenants' debt was about £210,000 but it increased to almost £386,000, an 80 per cent increase.

"The increase in former tenants' debt is pretty phenomenal," said Roger Jarman, of the Audit Commission's housing inspectorate.

"At some stage, they will have to address that and that will affect service delivery."

It has emerged that the council is considering selling off its entire housing stock - as neighbouring Sunderland did - which would wipe out its rent arrears.

The move, which tenants would have to vote for in a ballot, has been discussed in behind-closed-doors meetings, according to papers sent to The Northern Echo.

North Durham Labour MP Kevan Jones said: "The level of mismanagement has been monumental.

"This is another scandalous revelation and somebody at senior political level has to explain why this is has happened."

He said that Government intervention could put any sell-off plans on hold.

A council spokesman said: "Financial issues arising from the housing inspection have recently been considered by members and decisions have been taken on all the issues.

"As a result, changes have been made to bring about necessary improvements, as recommended in the Audit Commission's report."

The spokesman also confirmed that the council's chief executive, Mike Waterson, is on long-term sick leave.

The council's long-serving leader, Malcolm Pratt, announced earlier this year that he will stand down in May.