The council's attempted to gerrymander the allocation of council homes to raise the Tory vote in marginal wards, which has become one of the biggest financial scandals in the history of local government.

After an inquiry lasting almost seven years, John Magill, the district auditor, found that Dame Shirley was the driving force behind Westminster's use of its housing policy to keep the party in power.

He estimated the additional cost to local taxpayers in lost rents, cut-price house sales and keeping properties empty to be £31.6 million

The strategy was devised after election results in 1986 left the Conservatives with a slender majority in Westminster City Hall.

In a 2,000-page report, Mr Magill accused authority leaders of trying to export council tenants from marginal wards and selling homes at reduced prices under the right-to-buy scheme to people thought more likely to vote Conservative. He referred to "social engineering" and "gentrification".

The council "engaged in gerrymandering, which I have found is a disgraceful and improper purpose", he said.

He estimated the additional cost to local taxpayers in lost rents, cut-price house sales and keeping properties empty to be £31.6 million. This is the sum for which Dame Shirley and the five others will be liable unless the findings are overturned in the courts.

Since Dame Shirley, 65, has a reputed personal fortune of £60 million, she may have to pay the bulk of the surcharge.

The surcharge, which brings automatic disqualification from public office, was imposed also on the council's former deputy leader, David Weeks, the former housing committee chairman, Peter Hartley, the ex-managing director, Bill Phillips, and senior housing officials Graham England and Paul Hayler - both still employed by the authority.

The auditor's most damning criticism was directed towards Dame Shirley, one of the most colourful figures in local politics in the 1980s and a "can do" leader in the Thatcher mould. Mr Magill said she "knew that it was unlawful and wrong for the council to exercise its powers to secure an electoral advantage for any party, or to gerrymander, or, in pursuit of such advantage for her party, she was at least recklessly indifferent as to whether it was right or wrong". Her explanations were "evasive, false and misleading".

Frank Dobson, Labour's environment spokesman, told MPs that the scandal extended beyond a few maverick councillors to "the whole of the Tory Party from top to bottom - including people at 10 Downing Street".

He claimed that four Tories - the former Cabinet minister Peter Brooke, MP for City of London and Westminster South, the Northern Ireland minister of state, Sir John Wheeler, who sits for Westminster North, Mr Legg and the junior environment minister, Sir Paul Beresford - "were all involved in this to a greater or lesser extent".