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Lord Steel quit the Lib Dems today after an inquiry slammed his failure to report child sex abuse claims against the late MP Cyril Smith.

The former Liberal Party leader, 81, said he will also retire from the House of Lords "as soon as possible" after 55 years' unbroken service in Parliament.

But the grandee did not apologise or admit wrongdoing. Instead he said he was quitting to avoid "turmoil" in his party. He added he had struggled to hear while giving evidence, and was unable to clarify his evidence to the inquiry.

It suggests Lord Steel can no longer be expelled from the Lib Dems - a prospect which had been reportedly mulled by party chiefs.

Lord Steel's statement comes after the Independent Inquiry on Child Sexual Abuse savaged "decades of failure" that saw Westminster's establishment turn a "blind eye" to allegations.

The report accused Lord Steel of an "abdication of responsibility" for failing to act on allegations about Smith's sexual interest in children.

Smith - who died in 2010 - was investigated by police in 1969 over claims he sexually abused teenage boys at a hostel in Rochdale. Smith admitted he had acted as the boys claimed, yet police decided not to prosecute.

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Born as David Steel, Lord Steel was an MP from 1965 and Liberal Party leader from 1976 to 1988. Since 1997 he has sat in the House of Lords.

The inquiry heard Lord Steel read a 1979 article in Private Eye about allegations concerning Cyril Smith, and decided to speak to the MP about them.

During the discussion, Smith said the story in Private Eye was correct and Lord Steel "assumed" the offences had been committed - but no further action was taken.

Since Smith was not a member of the Liberal Party in 1969, Lord Steel told the inquiry he saw "no reason" at the time "to go back to something that had happened during his time as councillor".

He later recommended Smith for a knighthood without confronting him over whether he was still abusing young boys, the inquiry said.

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Today's inquiry report slammed Lord Steel, saying: "Given what Lord Steel knew, it was inappropriate that he saw fit to nominate Smith for a knighthood.

"It was wrong that he was uninterested and did not think it relevant that Smith had abused children."

The report added: "In our view, rather than give primacy to the protection of children, he yielded to considerations of political expediency and failed to launch a formal internal inquiry into Smith’s alleged activities."

Today Lord Steel said: "Knowing all I know now, I condemn Cyril Smith's actions towards children.

"Not having secured a parliamentary scalp, I fear that I have been made a proxy for Cyril Smith."

He added: "I have received indications that some in the Liberal Democrat Party wish me suspended and investigated again, despite a previous disciplinary process in Scotland which concluded that no further action was required.

"I am told that others are threatening to resign if a new investigation is started.

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"I wish to avoid any such turmoil in my party and to prevent further distress to my family. I have therefore thanked my local party secretary for their stalwart support through the whole IICSA process, and have informed the local party that my resignation is with immediate effect."

He added: "As to membership of the House of Lords, friends and colleagues including The Lord Speaker are aware that I have been contemplating retirement next month to coincide with the 55th anniversary of my election as an MP.

"With considerable personal sorrow, and thanks to all I have worked with in the party and more widely, I have now decided this is what I should do as soon as possible.

"My wife has suffered poor health this past year. I shall now stop the weekly travel from Scotland to London and enjoy a quiet retirement from public life."

Richard Scorer, a lawyer at Slater and Gordon who represents eight of Cyril Smith’s victims, said: “Steel’s total inaction after being told by Smith himself that he had molested young boys is unforgivable, most of all for those victims whose abuse he could have stopped.

“To suggest Steel is a scapegoat, as some have done, is grasping at straws. A pathetic attempt to excuse a man who admitted he knowingly turned a blind eye to Smith’s crimes. He is not being blamed for them but for his own failure to stop Smith when he had the chance.

“This must surely now be the catalyst for a mandatory reporting law, compelling those who suspect child abuse to report their concerns, and for an end to this culture of deference towards those in power which allowed Smith to evade justice for so long”.

After a major public probe, the Independent Inquiry on Child Sexual Abuse today savaged politicians and officials in the 1970s, 1980s and even later for valuing their colleagues' reputations "higher than the fate of children".

The long-awaited investigation into historical allegations against MPs, peers and civil servants in Westminster found political institutions "significantly failed in their responses to allegations of child sexual abuse".

The inquiry also said Tory MP Sir Peter Morrison was knighted despite rumours about his interest in young boys that were known by Margaret Thatcher.

Elsewhere the report said the National Council for Civil Liberties gave "foolish and misguided support" to the Paedophile Information Exchange, whose members included child abusers.

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However, today's 190-page report did find there was no evidence of an "organised network" of paedophiles within the government, following false claims by fantasist Carl Beech who was jailed last year for perverting the course of justice.

In a third case Victor Montagu, the former MP for South Dorset and 10th Earl of Sandwich who died in 1995, was let off with a caution after a 10-year-old boy alleged he had indecently assaulted him in 1972.

The police report at the time described the boy as "a simply lad, perhaps to be pitied".

Inquiry chair Prof Alexis Jay said: "It is clear to see that Westminster institutions have repeatedly failed to deal with allegations of child sexual abuse, from turning a blind eye to actively shielding abusers.

"A consistent pattern emerged of failures to put the welfare of children above political status although we found no evidence of an organised network of paedophiles within government.

"We hope this report and its recommendations will lead political institutions to prioritise the needs and safety of vulnerable children."

A Lib Dem spokeswoman said: “Cyril Smith’s acts were vile and repugnant. We have nothing but sympathy for those whose lives he ruined.

“The Liberal Democrats take the issue of vigilance and safeguarding seriously and constantly work to improve our party processes, including the introduction of a new complaints process last year.

“This Inquiry has set out a list of important recommendations which all institutions should take seriously and seek to learn from.

“Following the publication of the report, David Steel has resigned from the party and retired from public life.”