The handsome Edwardian house that was formerly Elm Guest House, near Barnes, in south-west London, was long ago converted into flats. Its eight guest rooms were rearranged into two-bedroom apartments, each worth today more than £500,000. Estate agents say that among the property's greatest attractions are its transport links.

Some 30 years ago, the convenient location was similarly appealing. "It is just over Hammersmith bridge, is well served by underground and bus services and by British Rail and is near the M4, A3, A4 and A40," said a newsletter published in 1982 by a Tory fringe organisation, the Conservative Group for Homosexual Equality. "The facilities include a sauna, solarium and video studio."

Two months later, Elm Guest House was raided by police and its owners, Haroon and Carole Kasir, were convicted at the Old Bailey of running a brothel.

The Kasirs had allowed a small industry to bloom in their establishment. Male prostitutes had found it a convenient place to take clients and it was probably perceived as a safe retreat for gay men in a society which, despite the legalisation of homosexual acts in 1967, was still profoundly homophobic. After Carole Kasir's suicide in 1990, that was, perhaps, how some would have liked the story of Elm Guest House to have ended.

Today, however, this suburban house is at the heart of a simmering scandal threatening to boil over and take with it the reputations of a swath of the political class of the 1970s and 1980s.

In 2012 Tom Watson, the Labour MP who played a key role in exposing the phone-hacking scandal at the News of the World, stood up in parliament to ask the prime minister to ensure that a dossier of information used in 1992 to convict a notorious paedophile called Peter Righton was examined thoroughly. Watson said he believed the file, if it still existed, would provide some evidence of a "powerful paedophile network linked to parliament and No 10".

Watson's comments, in part, prompted the Metropolitan police to set up Operation Fernbridge. Claims have since materialised about boys from Grafton Close Children's Home in Hounslow, west London, being taken to Elm Guest House, plied with alcohol and abused.

Cyril Smith, the late Liberal MP, accused since his death in 2010 of being an inveterate child abuser, is said to have regularly visited the property. Other names, some household figures, swirl around the internet.

Back in 1983, Geoffrey Dickens, a Tory MP, had got wind of something of this. He compiled a dossier, telling his family it was "explosive" and would "blow the lid" on powerful and famous child abusers. The dossier was handed over to the then home secretary, Leon Brittan, who acknowledged receipt in a letter and suggested the police had been informed. "In general terms, the view of the Director of Public Prosecutions is that two of the letters you forwarded could form the basis for enquiries by the police and they are now being passed to the appropriate authorities," he wrote. Nothing was heard of the Dickens dossier again.

Last year, after further questions by Watson, the Home Office searched for Dickens's files. It couldn't find them.

Pressed last week, the prime minister ordered another look. "I've asked the permanent secretary at the Home Office to do everything he can to find answers to all of these questions and to make sure we can reassure people about these events," David Cameron told reporters.

Yet as the Observer reveals today, the Dickens dossier was just one of 114 potentially relevant files found to be missing by officials when they did their initial search. "The public are going to think something fishy is going on and who could blame them," said Simon Danczuk, the Labour MP who outed Smith as a child abuser. The MP for Rochdale, Smith's old constituency, he believes there must now be a Hillsborough-style inquiry into the abuse scandal. "Since outing Smith I have had senior police officers coming forward, and others, who want to share their experience of investigating these sorts of matters," he said. "But they tell me that they feel they have to be cautious about what they say for fear of losing their pensions. One told me that he had signed a gagging order.

"I think an overarching inquiry would provide the space for people to come forward and share the information they have on what they investigated and what they found. I don't think they are going to come forward to talk to the permanent secretary of the Home Office and his limited inquiry."

On Saturday the shadow home secretary, Yvette Cooper, added her voice to those calling on Cameron to do more – whatever the consequences for the reputation of politicians. "The prime minister should ensure that the action now taken by the Home Office amounts to a proper investigation into what happened and also that Theresa May publish the full review conducted in 2013," Cooper said.

"We also need assurance that the police have been given full information now and are investigating any abuse allegations or crimes that may have been committed.

"The prime minister should also establish an overarching review, led by child protection experts, to draw together the results from all these different case, investigations and institutional inquiries."

Operation Fernbridge, staffed by seven detectives, trundles on, of course. But the jury is out on whether the secrets of Elm Guest House will ever be fully aired.

The questions a Hillsborough-style inquiry into organised child abuse would need to answer

1 What did Leon Brittan do with the dossier of allegations compiled by Tory MP Geoffrey Dickens?

2 Why did the police not investigate the claims contained within the Dickens dossier?

3 Did the Home Office fund the Paedophile Information Exchange and, if so, which minister approved it and why?

4 What happened to the 114 documents relating to organised child abuse that the Home Office admits it has either destroyed or lost?

5 Was the late Cyril Smith MP part of a network of high-ranking politicians and officials working in the 1970s and 1980s to cover up child abuse?