Dame Shirley Porter, a former Conservative leader of Westminster City Council, has paid £12 million to settle the surcharge imposed on her following the "homes for votes" scandal of the 1980s, it was announced today.

The cash was paid into Westminster’s bank account on July 1 in full settlement of her debts, said the council’s deputy leader, Kit Malthouse.

Dame Shirley owed the council a total of £42 million in surcharges, interest and costs, but the two parties reached agreement earlier this year to close the case in return for the smaller sum.

Mr Malthouse said that around £1 million of the money would be passed on to the Audit Commission to cover its expenses in fighting the case all the way to the House of Lords, while the rest would be invested in facilities and services for the local community.

In a statement, he said: "Earlier this year Westminster City Council reached a £12 million

mediated agreement with Dame Shirley Porter in full settlement of the outstanding surcharge. On July 1, the entire amount was deposited into Westminster’s bank account.

"Approximately £1 million of the money will be allocated to the Audit Commission towards legal costs its appointed auditor incurred in on taking this matter through the appeal courts up to and including the House of Lords.

"The remainder will be reinvested in the Westminster community. The exact allocation of this

money will be decided, following consultation with the District Auditor, at a Cabinet urgency meeting to be held shortly."

Surcharges were imposed on Dame Shirley after it was found that she approved a policy to sell off council homes to potential Tory voters in marginal wards to boost the party’s election prospects. The saga centred on a July 1987 decision by the Tory-controlled council to sell 500 homes a year under a policy called "building stable communities".

The District Auditor, John Magill, accused Dame Shirley and her former colleague David Weeks of "wilful misconduct" and "disgraceful and improper gerrymandering" after an investigation lasting several years.

In May 1999, Dame Shirley and Mr Weeks were cleared by the Court of Appeal, but in December 2001 five Law Lords unanimously allowed an appeal by Mr Magill, and ordered Dame Shirley and Mr Weeks to make good the losses claimed by the council.

Despite Dame Shirley’s claim that she had assets of just £300,000, Westminster fought a protracted and costly battle to get her to pay, including last year obtaining court orders in several jurisdictions freezing assets believed to be under her control.

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