When South Lakeland District Council tried to introduce the pay and grading structure, it was to help it implement "single status" for its workers to ensure equal pay for work of equal value across the organisation.

The council had what Rodney Brooke described as two "aborted internal attempts" to address the issue, before recognising that it was necessary to employ outside consultants.

Hearing of a successful exercise carried out by consultants for another council, SLDC decided to employ the same consultants for the first stage of the new scheme job evaluation.

The consultants were Taylor West Associates, and the man described as their principal was Gordon Taylor.

Taylor West carried out the job evaluation project successfully, according to Mr Brooke's report, and the council agreed to hire the consultants for the second stage. This was pay modelling, when job evaluation point scores were tied to particular grades.

To enable Taylor West to carry out the task, SLDC bought the use of the Link Pay Modeller system, devised by Link Reward Consultants. There is no suggestion of any problems with that software, Mr Brooke concluded.

Four council employees undertook two days training on the computer model however, Mr Brooke noted that the employees were not given an opportunity to operate the system. Access was entrusted to Taylor West, and SLDC employees had no direct access to the Pay Modeller.

The council's project manager was Andrew Taylor, the human resources manager, and the council's management team had almost weekly updates on the scheme.

In June 2003, the chief executive, Philip Cunliffe, reported that the management team had arrived at a system which it could support to members and trade unions.

Mr Cunliffe's report said that the system should mean that approximately 60 per cent of staff would remain on the same salary, with 20 per cent rising and 20 per cent coming down in pay.

The report forecast the cost of pay increases in the first year to be £212,836.

Between June and September 2003, the council's management team, together with Andrew Taylor, used the Pay Modeller operated by Taylor West to find a suitable scheme. More than 50 options were tested.

Eventually the management team settled on a blueprint known as Version 7.

There was considerable pressure at this point to install the scheme, Mr Brooke found, and he said that Jack Jones, the director of finance, decided not to check the figures, believing that detailed checks would be made by human resources staff when sending out letters to staff notifying them of their new grades.

Mr Jones also said that between July and September 2003, he had gained "greater confidence" in Taylor West.

A member of staff from the human resources department started to prepare spreadsheets identifying the individual proposals resulting from Version 7.

Mr Brooke said: "By the time she was about half way through, she had identified 33 cases where employees would receive pay increases not identified by TWA (Taylor West)."

The staff member informed Andrew Taylor who took up the matter with Taylor West and, Mr Brooke said, the latter "showed no concern and gave a plausible explanation for the errors".

Version 7 was unanimously accepted by the cabinet.

According to Mr Brooke, the report to the cabinet and the general purposes committee claimed that the immediate costs of the structure would amount to £326,400, including oncosts' and contingencies plus provision for the errors which had been picked up by the staff member when working out the spreadsheets.

Inserted in the report was a statement from Jack Jones.

It read: "Normally finance staff would vet the costings of any major exercise such as this. However, the complexity of the modelling has precluded this: we have not had any access to the Taylor West system so we have not made any checks on any costings produced, or the set up or criteria used within the system."

The scheme was taken to the general purposes meeting on September 29.

Mr Brooke said that this committee took the decision because the cabinet was excluded from decisions relating to the terms and conditions of service of employees. Mr Brooke noted that the general purposes committee was now subject to a financial limit of £250,000, imposed as a consequence of the current situation.

Seven out of nine members of the general purposes committee were present, although not all members understood that the final decision lay with them, said Mr Brooke.

In response to questioning, Mr Jones said that the paragraph he had added was not a disclaimer. There was, he said, no reason to question the figures.

Mr Brooke said there were two versions of how voting had gone but, either way, a maximum of three members supported the scheme.

In October, the human resources department sent out details of the new grades to departmental managers for checking.

However, checks by a council accountant suggested that the predicted costs of the scheme would exceed those that had been presented to the general purposes committee.

Jack Jones, who had already, according to Mr Brooke's report, been pursuing Andrew Taylor for further details of the new scheme, commissioned a full investigation into the costs, which took several weeks.

Mr Jones and the monitoring officer produced a report that said that 80 per cent of employees would gain from the exercise, rather than the 20 per cent forecast, and only seven per cent would remain on the same salary, compared to the 60 per cent forecast.

As a result, the long-term costs would be £1,608,300 rather than the £631,200 forecast.

At this stage, consultants were appointed to examine the issue, and Lionel Buteux of Link Reward Consultants broadly confirmed Mr Jones's findings.

Mr Buteux also found that 546 out of 748 pay and grading records produced by Taylor West were incorrect. Mr Buteux was scathing in his criticism of Taylor West, according to Mr Brooke.

Following a report by an external investigator, David Butler, the general purposes committee decided there was reason to instigate a disciplinary investigation into the conduct of the chief executive Philip Cunliffe, Jack Jones and Andrew Taylor.

The disciplinary process then took its course. Three elected members, acting as a preliminary investigating committee (PIC), considered allegations against each of three officers and decided to refer matters to Mr Brooke as the designated independent person.

During the process, Mr Brooke ruled that the officers had not had opportunity to comment or respond on some evidence, and a new PIC was set up.

Mr Taylor resigned during this process.

l Andrew Taylor was unavailable for comment this week.