COUNCIL leader Clyde Loakes has stepped down as chair of the Local Strategic Partnership (LSP) following revelations about the body's role in the misuse of public funds.

His resignation comes in the wake of revelations that millions of pounds of taxpayers’ money earmarked to help the poor, which the LSP is accountable for, were disastrously managed over a number of years.

Police are currently investigating claims that EduAction, the company which used to run education in the borough, used money it was given from the Neighbourhood Renewal Fund (NRF) to boost profits.

The Guardian understands detectives have begun to interview those involved under caution.

Five council officers are also being investigated by the council’s anti-fraud team for allegedly not reporting whistleblowers’ claims.

Lawyers representing EduAction, which has denied any wrongdoing, blocked the publication of the council’s own investigation into allegations relating to the NRF Youth At Risk program.

It later emerged that the company was paid around one million pounds through BNI without contracts being signed.

Cllr Loakes has refused to accept any responsibility for the scandal and repeatedly insisted the widespread systematic failings were nothing to do with the LSP, which is responsible for monitoring spending relating to NRF and its successor, the Better Neighbourhood Initiative.

He said: "I have been privileged to chair the Waltham Forest Strategic Partnership since I became Council Leader in July 2003 and to have seen the huge progress made in recent years.

“Today’s Partnership has the capacity and vision to help build the improved Waltham Forest we all want to see.

"Given my commitments as Council Leader and new responsibilities as chair of the North London Waste Authority I have decided that now is an appropriate time for me to stand down as chair.

"In the next few years the Partnership will function in a very different environment with greater emphasis on area-wide assessments.

“I am pleased that the partnership has chosen to make some governance changes to reflect these new pressures - including wider membership such as the leader of the opposition to provide objective challenge and a new chair from outside the Council to underline that all Partners are equal stakeholders."

Nick Tiratsoo, whose research uncovered many of the failings of NRF/BNI, said: "Councillor Loakes’s resignation is timely.

"Under his leadership, the LSP directly oversaw the BNI – a programme that was marked by chronic mismanagement, and is now the subject of a police inquiry.

"Loakes was warned about the fiasco that was developing from 2004 onwards, but failed to take adequate corrective steps.

"It is fitting that he should be taking up the chairmanship of a waste authority, because that is obviously where his talent lies."