The Vauxhall MP Kate Hoey last night handed over to the police allegations of fraud, intimidation and violence at the South London Green Badge Taxi School, a project closely linked to the Mayor's senior aide, Lee Jasper, and the recipient of grants from the Mayor's London Development Agency and Transport for London. This development marks a new phase in the City Hall grants scandal, which this newspaper has been uncovering in recent weeks.

Already, the District Auditor, the independent local government watchdog, has been called in to assist with the internal inquiry at the LDA into grants to bodies linked with Mr Jasper. Brixton Base, a training establishment of which Mr Jasper was patron, and which our reporter showed received £535,000 of LDA money but ran only three short courses, has now closed. Further evidence of financial irregularities there was discovered by BBC London. Both Conservative and Liberal Democrat candidates for Mayor are calling on the Mayor for a further explanation of the LDA's activities.

Mr Livingstone initially tried to accuse this newspaper of racism rather than responding to questions but has now allowed an audit to take place. With last night's move by Ms Hoey, it has become yet more important to reveal in full what has been happening to London council taxpayers' money.

At the taxi school, bank statements seen by this newspaper show that money was diverted to a body called the Inner City Fund, controlled by Mr Jasper's associates Greg Nowell and Clive Grey, which was struck off the companies register for breaking company law. Following an investigation in March, the LDA has refused to provide further funding to the taxi school, which was supposed to teach ethnic minority students the Knowledge.

At stake in these cases is money that comes from London council taxpayers of every ethnic background, money that could have been used to fund many excellent projects in the black community and elsewhere. Instead, much has gone missing in deeply troubling circumstances. The Mayor must treat this evidence with the seriousness it deserves.

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