Downing Street cynically tried to prevent the release of damaging files exposing the scale of the cover-up over paedophile MP Cyril Smith.

The Cabinet Office repeatedly blocked The Mail on Sunday’s attempts to see the bombshell documents – and caved in only after being threatened with High Court action.

After the shocking year-long fight, we can reveal the content of the papers, which expose just how much the Establishment knew about the late politician’s sexual and physical abuse of young boys.

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Margaret Thatcher (left) was personally told that police had investigated claims that Cyril Smith (right) indecently assaulted teenage boys in the 1960s

Nick Clegg and David Cameron, both Ministers in the Cabinet Office, have been accused of ‘colluding’ in the latest cover-up of evidence that could expose VIP paedophile rings.

The secrecy row will also focus attention on Cabinet Secretary Sir Jeremy Heywood, who has become known as ‘Sir Cover-Up’ after blocking the release of dozens of messages exchanged by Tony Blair and George W Bush ahead of the Iraq war.

Following The Mail on Sunday’s victory, it can be revealed for the first time that:

- Margaret Thatcher was personally told that police had investigated claims that Smith indecently assaulted teenage boys in the 1960s.

- Thatcher was explicitly warned that awarding a knighthood to the 29-stone Liberal MP risked damaging the ‘integrity of the honours system’, but went ahead anyway.

- A senior Whitehall mandarin took the ‘exceptional’ step of contacting the country’s top prosecutor and police to find out why Smith was never charged with abusing boys at a hostel he helped run.

- Civil servants feared the secret Smith police file might be made public in 1982 – when a burglary at the Fleet Street offices of The Sun newspaper revealed the editor was in possession of a copy. This revelation will lead to speculation that the break-in was linked to attempts to cover up Smith’s crimes.

One insider told The Mail on Sunday that the matter is ‘on the Deputy Prime Minister’s desk’. The fact that the Cabinet Office blocked five attempts by The Mail on Sunday to see the papers will deepen fears of a cover-up at the highest levels over the activities of VIP paedophiles.

Labour MP Simon Danczuk, who exposed the scale of Smith’s abuse in Parliament, said: ‘Nick Clegg and David Cameron have colluded in covering this up. It involves their people and we should not have to learn about this piecemeal because of journalists pestering for information.

Clegg and Cameron accused over 'cover-up'

‘Both men need to come clean and make a personal commitment to revealing everything that is now held by Government departments.

‘The Prime Minister promised there would be no stone unturned into the inquiry of historic sex abuse in Westminster. But the Cabinet Office seems to be doing the opposite.

'Nick Clegg, who sits in this department, has already written to me refusing to carry out an investigation into who knew what about Cyril Smith in his party and it’s disappointing to see the Cabinet Office continuing this unhelpful approach.’

Smith was knighted in 1988 as recognition of his service as a councillor, mayor and MP in Rochdale, Lancashire.

After his death at the age of 82 in 2010, Clegg said he was ‘deeply saddened’ by the loss and said everyone in Rochdale knew him ‘as a friend’.

But two years later claims emerged that he repeatedly spanked and sexually abused boys in care homes and hostels, but the authorities saw to it that he was never brought to justice.

Nick Clegg (left) and David Cameron (right), both Ministers in the Cabinet Office, have been accused of ‘colluding’ in the latest cover-up of evidence that could expose VIP paedophile rings

The Crown Prosecution Service revealed he had been investigated in 1970, 1988 and 1999 while Greater Manchester Police admitted there had been ‘overwhelming evidence’ that he abused boys both physically and sexually.

A year ago, after a battle with campaigners, the Cabinet Office was forced to reveal that former Liberal leader David Steel had proposed Smith for his knighthood.

Now The Mail on Sunday has finally been given unprecedented access to the Downing Street files on the case.

On April 28 last year, this newspaper put in a Freedom of Information request to the Cabinet Office asking for all No 10 correspondence on Smith’s knighthood, which should have been answered within a month.

But officials on four occasions put off providing a response, and then refused a request to review the case.

In October we complained to the Information Commissioner’s Office, which ruled last month that the Cabinet Office had broken the law by failing to respond to the original request.

The secrecy row will also focus attention on Cabinet Secretary Sir Jeremy Heywood (pictured)

The regulator ordered the department provide the information or risk being reported to the High Court where ‘it may be dealt with as a contempt of court’.

A Minister in the Cabinet Office would have been called to court to explain why the information had not been disclosed.

On Friday the department finally released a 19-page dossier on the-secret discussions that led to Smith being knighted, although other pages were withheld on grounds of national security.

The Cabinet Office said: ‘We have released almost all of the information held about this matter. We concluded that the public interest favoured releasing this information rather than applying the usual exemptions that cover honours material. We are sorry that it has taken some time to consult all relevant officials.’

One undated letter, marked ‘secret’, from a leading member of the Political Honours Scrutiny Committee to Mrs Thatcher, warned of ‘the risk that such an award could give rise to adverse criticism’.

Lord Shackleton – son of the famous explorer – spelled out that police had investigated Smith in 1970 for ‘indecent assault against teenage boys’ between 1961 and 1966, but that the Director of Public Prosecutions (DPP) had decided ‘there was no reasonable prospect of conviction’.

The letter mentions the case was reported in the Rochdale Alternative Press and Private Eye, adding: ‘One may regret this kind of press reporting but it could be revived if an award to Mr Smith were made.’

It also describes a little-known break-in at the The Sun newspaper in 1982 that led police to discover ‘the editor of The Sun had a copy of the 1970 police report’.

Lord Shackleton said it would be ‘slightly unfortunate’ if this ‘episode’ stopped Smith being knighted, but added: ‘We felt it right to warn you of our fear that the integrity of the honours system would be at some risk if the award were to be made and announced.’

A second note to the Prime Minister, dated May 1988, admitted the committee had ‘some hesitation’ about the award but concluded: ‘So far as we believe and have been able to ascertain, his past history or general character does not, in all the circumstances, render him unsuitable’.

A separate letter from the committee secretary says it decided to give Smith the ‘benefit of the doubt’ as he had never been prosecuted.

The secretary had earlier warned Sir Robin Butler, then Cabinet Secretary, that ‘the press might stir up adverse comment’ over Smith’s knighthood ‘if there is fire under this smoke’. To decide the issue they demanded to see the police evidence.

Sir Robin wrote to the DPP, saying: ‘The case for taking the exceptional step of writing to you in this way is to protect the Prime Minister (and The Queen) while also being fair to Mr Smith.’ He said the committee wanted to know ‘whether the case against Mr Smith was not well founded: or whether it was a sound case, but that the evidence was not likely to stand up in court’. No reply from the DPP is recorded.

The revelations will add to fears that the authorities knew high-profile figures were reportedly child abusers, but tried to keep the allegations secret.

The Cabinet Office is still refusing to release even the titles of four recently discovered historic files on child abuse, a decision called ‘disgusting’ by victims’ families.

An wide-ranging inquiry into historic allegations of child abuse in Britain has yet to get under way.