LIVERPOOL Council’s controversial £78m-a-year IT deal with BT must not be extended any further, legal experts have ruled.

The joint venture Liverpool Direct Limited (LDL) was set up in 2001 and was originally intended to last until 2012.

But in December 2006 the contract was extended to run up to 2017.

The city council has now spent more than £223,000 with consultants investigating the LDL contract for more than a year. It has now been revealed the council will not be able to extend it again and must put it out to tender allowing other companies to compete for the huge deal.

Under the current terms, the council can pull the plug in 2012, but it could have to pay BT as much as £20m to do so.

It has also now been disclosed that although the chief executive of LDL, David McElhinney, is still employed by the city council his contract states that he must work in the “best interests” of LDL.

Last night Wavertree MP Jane Kennedy called on the district auditor to investigate the deal.

“It’s a scandal. The taxpayers of Liverpool should be outraged.”

Last month the Daily Post revealed how the local authority is yet to be paid a penny in profit from the flagship IT and call handling joint venture set up with BT eight years ago.

The city of Liverpool owns around 20% of LDL and was expected to make significant profits from large amounts of outside work the company has taken on since then.

The council has set up an inquiry panel to continue the investigation and get to the bottom of the deal.

Liverpool Direct Ltd was set up in 2001, to improve the council’s customer services department.

It has since expanded its remit into other areas of the authority.

The council launched a probe of the contract last year after a damning external report stated that bills for the LDL deal were “opaque” and “lacked transparency” – raising doubts about whether the council was getting value for money.

At the first sitting of the panel assistant executive director Ben Dolan defended the deal but said improvements were needed.

“There is no doubt that LDL repositioned the city as a place to do business, it was transformational. The issue for me is that it is not unreasonable to expect our partnership to get more efficient over time.