Pay as you err, Mrs Smith: Neelah was a fine nurse but her accounts were in a mess. Did she deserve to go to jail? Jim White hears the protests

'THIS is what really gets me,' said Richard Smith, reading the front-page headline of his local paper. ' 'Wife killer may be jailed', it says. 'May' be jailed. I like that. There wasn't any 'may be' for my wife. Where's the bloody justice in it? That's what I want to know.'

As Mr Smith talked in the Marine Hotel, Hunstanton, the landlord leant across the till.

'How is she, Richard?' he asked in a tone usually reserved for addressing the bereaved.

'Oh, bearing up,' said Mr Smith.

'Well, let's just hope sanity prevails,' said the landlord, returning to his takings.

There is only one topic of conversation in the small Norfolk seaside town this autumn: the case of Neelah Smith. Along the front, groups of elderly locals, muffled against the chill whipping off the North Sea, spend most of the day shaking their heads over it. In the High Street, the hoarding advertising the Lynn News outside the newsagent's shouts 'Neelah: latest developments'. Behind the bar of the Marine Hotel and in the windows of every other shop and cafe, there is a poster: 'Free Neelah. Sign the petition here.' So far 1,500 of her fellow citizens have put pen to petition on her behalf.

Esconced in Drake Hall prison in Staffordshire, Mrs Smith is touched by the support. 'I think a lot of people were surprised at the sentence,' she says. 'But from the moment it started, I had a feeling I was going to go down. I just kind of knew it.'

Mrs Smith was sentenced to 18 months in September by Judge Geoffrey Binns, the same judge who put three East Anglian vigilantes inside for five years. Her crime was PAYE fraud. Mrs Smith, the owner of an old people's home in Hunstanton, had, over a period of five years, deprived the Inland Revenue of an estimated pounds 60,000 in tax on staff wages.

'You have a lot of time here and I've gone over and over it in my mind,' said Mrs Smith, toying with a cup of muddy prison coffee. 'And I honestly can say I've done nothing to be ashamed of.'

Neelah Smith was 22 and fresh out of nursing college when she opened Groveland House old people's home in 1982. It seemed a perfect opportunity to combine her professional skill with a pleasant little earner.

At the time Hunstanton was enjoying something of a boom in the old people's home business. Encouraged by government policy that sought to place the elderly in private hands with the local authority picking up the tab, care entrepreneurs had moved in. The empty Edwardian guesthouses along the seafront provided ideal premises. In 1980 there were two old people's homes in a town of some 4,000 people; by the end of the decade there were 29.

After five years learning her trade and earning the certificates from the British Federation of Care Home Proprietors that now decorate Groveland's walls, Mrs Smith decided to expand. In 1987 she bought the house next door, financed by a mortgage on Richard's parents' bungalow, so that she could provide for 20 residents. And provide she did: she had a hairdresser come in once a week, bought flowers and birthday presents for residents, took them on theatre trips.

'Oh, she was marvellous,' says Jessie Bunting, 86, a resident. 'I was here for two years, then a nurse left for another home and persuaded me to go with her. I came back after six months. That was two-and-a-half years ago. Over the last couple of years I've had six eye operations. Neelah was by my side, holding my hand for every one.'

But whatever skill Mrs Smith had as a nurse - and at her trial affidavits piled up comparing her to Florence Nightingale - she was no businesswoman. Rent at Groveland was at the minimum DSS-recommended rate, extras came gratis. As far as accountancy was concerned, her practice was to file in a carrier bag. 'It was more important for me to be with my residents, giving them love, care and respect, than being at my desk working out figures which made no sense to me,' she says.

What with rising interest payments on her loan, a reluctance to make the most of her captive market and a change of government policy in favour of care at home rather in a home, by the end of the decade Mrs Smith found herself in financial trouble. In 1991, Groveland went bankrupt, with debts of more than pounds 220,000. The receivers kept her on as manager of the home, and allowed her and her family to remain in the flat in the basement.

'I think they had faith in me,' says Mrs Smith. 'Unlike some

people.'

But her major problem had not been debt. It was employment: finding staff prepared to work in a residential old people's home for the miserly wages that were all she could afford to pay.

In the window of Hunstanton's Job Centre, there is a whole board giving details of care work: old people's homes have replaced tourism as the town's biggest employer. 'Temporary night care assistant in small friendly residential home,' reads a typical vacancy. 'Saturday night 8pm to 7.30am. pounds 2.60 per hour.'

All of the two or three dozen jobs are part-time; most stipulate that nursing experience is essential. But what sort of nurse is prepared to work for that sort of money? The answer is an NHS nurse.

'Moonlighting is very common among nurses round here,' said Denise Collison, a local NHS nurse who worked at Groveland for more than three years. 'I should think two-thirds of us do second jobs.' To make it worth their while, many nurses prefer not to bother the Chancellor by informing him of their secondary employment. 'Put it this way,' says Ms Collison, 'I could go to any one of several homes in this town and get cash-in-hand work for tonight. And that's how I used to used to work for Neelah. It's the only way she could afford to attract decent staff.'

Mrs Smith says she cannot remember when she first became a participant in Hunstanton's vibrant black economy. 'I don't recall the exact circumstances, it was probably to cover sickness or staff shortage,' she says. 'I paid that nurse as a one-off from my own drawings off the business and thought nothing of it.'

News travelled fast. Soon the one-off became practice: whenever Mrs Smith took someone on, it was agreed between the parties that only a certain number of hours would be declared. Anything above that would be cash-in-hand.

The arrangement worked to all parties' satisfaction (except the Revenue's) for several years. 'Staff did not want pay deductions,' says Mrs Smith. 'They were perfectly happy to be party to it, but I've taken the rap. God, I was stupid.'

The cosy conspiracy was shattered in 1991 when one of the staff sent her payslip to the DSS, pointing out a discrepancy between stoppages and hours worked. 'I'd really love to know why she did it,' says Mrs Smith. 'I've racked my brains to see if there was any animosity between us, but I can't honestly remember any. I had a conversation with her father after it had happened and he said 'Oh, don't worry about it, just tell them it was down to women's problems'.'

And so in December 1991, two Inland Revenue inspectors called at Groveland House. At first Mrs Smith denied any impropriety, but after advice from her solicitor she decided to co-operate. Her decision was reached in part by the Revenue offering her form IR 109, which explains how settlements are negotiated where too little tax has been paid as a result of fraud or neglect. She handed over her books and waited.

A year passed, during which the home was declared bankrupt and her husband was seriously injured in a car accident. Then she received a letter from the director of the Inland Revenue at Peterborough that had a blunt message: '. . . in view of the gravity of the irregularities in your PAYE records . . . the Inland Revenue may, in due course, consider taking criminal proceedings instead of seeking financial settlement'. The offer of negotiation over repayment was formally withdrawn.

Peter Britton, Mrs Smith's solicitor, says: 'Basically she was being clobbered for being co-operative. It would have been almost impossible for them to prove the case if she had not been prepared to talk. She gave them the rope, they hanged her.'

For more than a year Mrs Smith waited for the Revenue to take its action, while trying to run the home. 'Hunstanton is a small place and rumours started to fly round the town about the case,' she says. 'Richard said I was being paranoid, but I knew people were talking about me when I walked down the street.' Rumours reached the local authority, which reduced referrals to the home.

In February this year, Mrs Smith was committed for trial. She pleaded guilty and a sentencing hearing was arranged for 2 September. 'From the off, my solicitor had warned me that a custodial sentence was a possibility,' she says. 'I joked about it with my staff; they said they'd send me a cake with a file in it. But he thought the fact I was doing it to keep the home going for the good of my residents and not to line my own pocket would act in my favour. Ha.'

Despite a string of character witnesses, despite counsel for the prosecution saying that the Revenue did not consider imprisonment appropriate as she had made no personal gain from the fraud, and despite having two small boys at home, Mrs Smith was taken from court to Holloway to begin an 18-month sentence.

'It was clear that the sentence was intended to be exemplary,' says Mr Britton. 'It was a warning.'

The warning hit Hunstanton like an autumnal gale, sending business people scurrying for their books. 'There but for the grace of God,' says one local businessman. 'How many tradesmen offer discounts if you don't put it through the books? How many people flog fruit and veg from their garden and don't declare it? Who pays tax for their baby-sitter? Who here in this town can hold their hand up and say they're not at it? It could have been any one of us up there.'

Hunstanton is the kind of place where they like a quiet life, where people move to avoid inner-city problems, where Michael Howard's crime-busting initiatives will find overwhelming support. But, as the outrage expressed in their petition demonstrates, it is a community that cannot understand how one of its own, doing the sort of things considered commonplace, can have been mistaken for a criminal.

'Don't get me wrong, I know Neelah broke the law and had to be punished,' says the businessman. 'But 18 months? When they let rapists off with a pat on the head? Come on. Tell me another.'

Next Tuesday, Mrs Smith's appeal against sentence will be heard at the High Court. If she succeeds, she may well be out in time to take her residents to the theatre in Hunstanton for Christmas. After all, she says, they wouldn't want to miss Ken Dodd.

(Photographs omitted)