It was, said the Illustrated London News edition of April 1847, “without doubt the finest specimen of gothic civil architecture in Europe: its proportions, arrangement, and decoration being perfect, and worthy of the great nation at whose cost it has been erected”. Queen Victoria was equally approving, writing in her diary that year that “the building is indeed magnificent, in gothic style very elaborate and gorgeous … the whole effect is very dignified and fine”.

Designed by the architect Charles Barry, in collaboration with Augustus Pugin, who was responsible for the detail on the exteriors and most of the interior design, the new Palace of Westminster met with almost universal approval as a replacement for its ancient predecessor, large parts of which had been razed to the ground by a fire in 1834. Tsar Nicholas I called it “a dream in stone”.

Caroline Shenton, author of a recent book, Mr Barry’s War, an account of the reconstruction, says the fire had been “an accident waiting to happen”. It was, she found, “caused by the burning of two large cartloads of wooden tally sticks (a form of receipt for government income kept in the Exchequer, whose offices were in the old palace) in the underfloor heating furnaces beneath the House of Lords chamber on 16 October 1834. The labourers were unsupervised and a chimney fire smouldered in the flues for much of the day. No one went to check when there were warning signs, and at six in the evening the fire broke out and quickly engulfed the whole building.” Lord Melbourne, in the subsequent inquiry, described the fire as “the greatest instance of stupidity on record”.

Now, 183 years on, the Observer has seen a confidential report by fire safety engineers showing the extent to which Barry and Pugin’s masterpiece is at risk of a similar fate because of seriously inadequate and failing safety systems, as the palace prepares for a huge refurbishment that is not due to start until after the 2020 general election. The work is likely to mean MPs and peers evacuating to temporary accommodation in Westminster for a minimum of five to six years and is estimated to cost at least £3.5bn. But some MPs say that total evacuation is unnecessary and will be too disruptive, and back options for only a partial exodus that will delay completion for decades and end up costing 10 times as much.

The fire that destroyed the first palace was called ‘the greatest incident of stupidity on record’. Photograph: Hulton Archive/Getty Images

The Commons authorities are, however, increasingly worried about further delay, having been warned in the secret report they commissioned from fire safety engineers last autumn of a “life safety risk”. On Sunday the all-party Treasury select committee announced its own report into the restoration, saying that insufficient evidence and information has been provided to MPs on the costs and potential disruption from the options and timetables so far suggested.

The Observer can also reveal that, unbeknown to MPs and peers, the palace is only able to comply with a 2005 fire safety order – which makes it legal for use – because of 24-hour fire safety patrols that are now carried out behind the scenes by 24 fire patrol officers on the parliamentary estate, who do six-hour shifts around the clock.

The report states that the fire alarm systems are inadequate and require “immediate work”. The engineers said: “It is imperative that these works are procured and delivered quickly.” They also reported a lack of escape routes. “There is a lack of coverage in areas, particularly means of escape routes. This is considered a noncompliance for life safety and therefore additional detection should be provided to these routes as a priority.” The cost of the 24-hour patrols makes up a large part of the annual bill for keeping the palace in a usable state, which hit £49m at the last count.

A Westminster source said fire alarm cabling and systems were “so antiquated that they fail regularly and replacement parts are no longer available. The poor disabled access in the palace means emergency evacuation procedures for people with mobility impairments do not meet acceptable standards.”

Some 60 incidents with potential to cause a serious fire have been recorded since 2008. “A fire above one of the plant rooms recently was caused by an old electrical cable, and was only detected by chance,” said the source. “Had it occurred at night or at the weekend it is highly likely that it would have caused major damage.” The Observer has also been told that high levels of asbestos are expected to be found – including behind the wood panelling of the Commons chamber.

In a report last year a joint parliamentary committee of MPs and peers appointed to examine the refurbishment options concluded that the restoration and repair works were essential to mitigate fire risks, and warned of the potential for catastrophe. The committee backed the “full decant” option of evacuating the palace completely.

Chris Bryant, a Labour MP on the committee, said: “All the evidence points to having to move out of the whole palace simultaneously. That is the lowest-risk, most cost-effective and quickest option.” A Commons vote on whether to press ahead with a full or partial evacuation is expected in the comings weeks.