Chester-le-Street District Council's housing department has been heavily criticised by inspectors.

An Audit Commission report says the department is so poorly managed that it is 'unlikely to improve.'

The report also accused the department - responsible for 5,600 council houses in the district - for wasting money and failing to spot investment opportunities.

Housing services were criticised for:

* Failing to comply with gas safety regulations.

* Putting management concerns before customer needs.

* Having a disregard for customer confidentiality.

* Wasting, through poor management, an estimated £480,000

* Having little or no tenant consultation.

* Letting the number of empty council houses increase

* Failing to bring in public sector investment, losing the council a potential windfall of around £1m.

The 25-page report was published just days after the council hailed a survey showing that most residents were satisfied with the services.

North Durham MP Kevan Jones called for urgent changes.

He said: "This is an absolutely damning report that backs up what people have been telling me since June. They very clearly need radical action now."

Council managers were quick to reply.

Chief executive Mick Waterson said: "We also absolutely refute some of the criticisms.

"For example, they say that we have failed to comply with gas safety regulations, yet all our properties have had their gas boilers serviced to Corgi standards within the last 12 months. We have already addressed many of the issues it raised and believe we have the capacity to make the necessary improvements.

"The most important aspect is the service we give to tenants and our own survey, completed by around 25 per cent of tenants, shows relatively high levels of satisfaction."

Council leader Malcolm Pratt accused the commission of being selective with its statistics.

"The inspectorate has said we are unlikely to improve our housing services without, what they call, a 'step change' - that is a radical change.

"We have already appointed a new housing manager who will oversee the recently merged housing and public works teams and deliver the seamless service our tenants deserve."