An urgent investigation has been ordered into whether rules aimed at preventing lying parents from flouting the school admissions system should be toughened.

Ed Balls, the Schools Secretary, called for the inquiry hours after a council in northwest London had to abandon a court case against a mother whom it suspected of falsifying her address to get her child into a good school.

He had previously said that the admissions code, under which school places can be withdrawn if obtained by false pretences, was sufficient to tackle cheats. Last night he wrote to Ian Craig, the schools adjudicator, who oversees the admissions code, asking him to investigate the scale of the problem and whether existing powers are sufficient to prevent parents “unfairly playing the system”.

Lawyers and councils said yesterday that parents could breach the code with impunity because sanctions for those who lie on their application forms are not tough enough. Schools would be reluctant to remove children once they had started, they said.

Harrow council dropped its case against Mrinal Patel, who was accused of lying to get her son into an oversubscribed primary school, because they were unsure that the Fraud Act would cover admissions cases. It chose to use the Act in the absence of specific legislation to cover such cases.

Council leaders said that they were considering using perjury laws in future cases, although they would not pursue Mrs Patel further. Their decision exposes the lack of legislation to prosecute school admission cheats and may lead to middle-class parents becoming more brazen in their attempts to colonise the best schools.

Yvonne Spencer, a partner in the education department at the law firm Veale Wasbrough, said that there was no way for councils to penalise parents who cheat and that the code was not robust enough.

Mrs Patel, 41, applied for a place for her five-year-old son Rhys at Pinner Park First School, Harrow, in January last year. She claimed in her application that she had lived for 14 years in walking distance of the school, but after Rhys was offered a place, Harrow council learnt that the address she had submitted was her mother’s.

Rising numbers of parents cheat the system by using addresses belonging to grandparents, converting to another faith or claiming that their child has a medical condition. David Ashton, the leader of Harrow council, called for tougher powers for councils. “If there aren’t any sanctions for parents then they think, ‘What is there to lose?’ ”

Mrs Patel said she was relieved that the council had dropped the case. “I have denied the allegations and the council’s unconditional withdrawal of the proceedings confirms my innocence,” she said. When she made the application she said she was separated from her husband and had been living at her mother’s address. She claims she had no intention of going back to her matrimonial home, which is farther away from the school, but changed her mind four weeks later.

“I still don’t feel I have done anything wrong,” she told the BBC. “My biggest mistake was that I didn’t tell the council I had moved out [of her mother's flat] when I did.”

The school had 411 applications for 90 places available in September 2008, allocating them to those living closest.

The underhand methods

Unscrupulous parents have been caught:

— renting a small flat close to the school and using that address on their school application form announcing that they are separating, with one moving closer to the desired school during the application period

— converting to Catholicism/ Anglicanism/Islam as appropriate. Some parents start attending church or mosque regularly and declaring their new-found faith publicly

— inventing a medical condition for their child and telling the preferred school that a place is needed for health reasons

— moving in with their in-laws and using the address to gain a place.

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