Chester-le-Street District Council leader Malcolm Pratt is to meet deputy Prime Minister John Prescott about the future of the council's poor housing department.

Senior council officers will also be at the meeting with Mr Prescott, the Secretary of State for Local Government and the Regions, after the Audit Commission took the unprecedented step of referring the council's housing service to his department.

The meeting comes after the commission's second damning report into the running of the department in 18 months.

It was given a 'poor' no-star rating after commission inspectors found that rent arrears amounted to £641,000, the equivalent of £120 per house. The arrears were just one of a number of failings.

Coun Pratt defended the council by saying a survey revealed that residents were generally happy with the service it provided and said it was hampered by being a small council with minimum resources.

But the seriousness of the situation was reinforced by Housing Minister Tony McNulty, who responded to the Audit Commission's report by issuing a statement. In it he said that the report made 'very worrying reading indeed.'

He said: "My main concern is that the tenants and residents of Chester-le-Street are being let down; this is unacceptable, they deserve better. I am considering carefully and quickly what action is needed in the light of the report and what action is needed to bring about real service improvement."

Shortly after the release of the report, Coun Pratt requested the meeting with deputy Prime Minister John Prescott to discuss improvements and took further action by replacing the council's cabinet member for housing. Coun Linda Ebbatson is now portfolio holder for housing. Her predecessor Mel Robinson resigned before the commission's announcement.

Coun Ebbatson said: "This is an opportunity for change. I welcome the assistance the Government can offer and will work with them to bring about the improvements that are needed to our housing service.

"This will be a difficult time, but we have staff in place who I know are committed to working hard to meet the needs of the people of the district."

North Durham Labour MP Kevan Jones said: "I welcome Linda's appointment and look forward to working very closely with her to help turn around the housing department at Chester-le-Street council and to ensure my constituents get the service they deserve."