Information about abuse at children’s home frequented by Cyril Smith was allegedly received but not acted upon

The independent inquiry into the apparent failure of politicians and public bodies to investigate historical sex abuse will examine allegations that John Major’s government failed to act when it was informed of widespread abuse at a children’s home frequented by the late paedophile MP Cyril Smith.

The inquiry has been told that in 1995, detailed claims of rape and sexual grooming of pupils at Knowl View school were sent to the office of Gillian Shephard, the then education secretary.

But instead of intervening, senior civil servants referred the dossier back to the council, the Guardian has learned. Shephard, who is now a baroness, confirmed that her office received the file but insists she knew nothing about it.

Paperwork from the Department for Education about the dossier has been passed on to the Home Office institutional abuse enquiry, headed by Fiona Woolf. She is examining allegations that figures in Westminster and Whitehall were implicated in the failure to protect children.

The same paperwork has also been referred to Greater Manchester police, the force that has launched a criminal investigation into an alleged coverup of child abuse at a Knowl View and the decision not to prosecute Smith.

Dozens of former pupils from Knowl View have come forward to say they were abused at the school. Smith, who died in 2010, is alleged to have assaulted several children at the school.

Simon Danczuk, the Labour MP for Rochdale and co-author of a book about Cyril Smith and Knowl View, said that the disclosure appears to be the first confirmation that central government knew but failed to act upon allegations of abuse at the school.

He said: “It’s one of the country’s worst ever child sex scandals and the fact that documents outlining the abuse taking place were sent to a cabinet minister and not acted on is shocking.

“It’s hard to fathom just what government officials were thinking of by sending a dossier about council failings straight back to the council. It’s as though Knowl View was a hot potato that no one wanted to catch and address. They just kept throwing it to someone else in the hope it would go away,” he said.

Knowl View, a special school for boys, opened in 1969 for boys aged from eight to 16. For 24 of the 26 years it was open, Smith was a governor there.

The dossier sent to Shephard’s office gave details of allegations that boys at the school were being groomed by known paedophiles; referred to a report by a clinical psychologist claiming that residents, aged between eight and 16, had engaged in serious sexual incidents; and listed concerns from health professionals that residents were at risk of Aids.

In February 1992, a report by a consultant clinical psychologist, Valerie Mellor, concluded that one in four boys had been subjected to serious sexual abuse.

A year earlier, the council had received a report from an Aids specialist saying that the sexualisation of boys put many at risk.

Some were cottaging, others were known to consort with a paedophile, while others, one as young as eight, was engaged in sex with fellow residents.

Martin Digan, the school’s former social worker who blew the whistle on abuse at Knowl View, compiled the dossier. He says he did not send it to Shephard’s office.

The school was closed in 1995 following a fire and shortly afterwards Digan was made redundant by the council.

The Woolf inquiry will consider whether, and to what extent, public bodies and other institutions fulfilled their duty of care to protect children from sexual abuse. It followed the outcry over the way that Smith and the late DJ Jimmy Savile had been able to abuse hundreds of people despite many allegations against them.

The Guardian first came across questions around the Department for Education’s involvement two weeks ago after seeing a letter from a QC who is leading an inquiry ordered by Rochdale council into allegations of a cover up around Knowl View.

The letter sent by Neil Garnham QC said that Shephard’s office had been sent “the Digan dossier”.

When approached for a comment, Shephard said she had contacted her former department and confirmed that it had received the dossier. “I have checked with the Department for Education. There was correspondence [about Knowl View] in 1995. They can find no evidence that I personally received it nor that I was personally involved in responding to it,” she said.

Asked if she sympathised with claims that earlier central government intervention may have helped victims who have since committed suicide or self harmed, she said: “Everybody has got sympathy with victims in Rochdale. But it really was the responsibility of the council.”

She declined to say if she was able to identify the officials who had sent the document back to the council.

Digan said on Monday that central government intervention in 1995 could have forced the council and the police into action, bringing treatment for victims and more prosecutions of rapists.

He said he is aware of at least one former pupil who went on to take his own life because of the abuse he suffered at Knowl View, while others went on to commit violent crime.

He said: “It is outrageous that the government did not intervene. Government, then and now, has a responsibility to stop institutions from becoming a sweet shop for paedophiles and uncover the truth.”

Shephard was education secretary between 1994 and 1997 and made a life peer in 2005.

Digan was acting head of care at the residential school for boys with learning difficulties and behavioural problems. He had often complained that Smith kept using his own set of keys to access the school.

Last year, the Crown Prosecution Service admitted Smith should have been prosecuted for abusing young boys in the 1960s.

A DfE spokesperson said: “We are of course aware of the issues in Rochdale. We are working closely with other government departments and any information that the department holds will be submitted to the ongoing Home Office investigation.

“The department has identified the relevant file and had already both alerted the Home Office institutional abuse enquiry to its existence and sent it to Greater Manchester police to help with their investigations,” she added.

The department would not say when in 1995 it received the dossier and whether officials launched any form of investigation into its allegations.