A Croydon councillor is likely to be thrust under the spotlight of a judge-led public inquiry after a damning report confirmed the Metropolitan Police spied on the family of murdered teenager Stephen Lawrence.

Coun David Osland, for Coulsdon West, was deputy assistant commissioner for the force when the 18-year-old was stabbed to death in 1993 and led the investigation into the killing.

Home secretary Theresa May ordered an inquiry into undercover policing following the publication of a report by Mark Ellison QC, which revealed the Met deployed an undercover office to attach themselves to the Lawrence family during their two-decade fight for justice.

The spy, from Scotland Yard's Special Demonstration Squad, monitored the family during the inquiry led by Sir William Macpherson into the Met's botched murder investigation.

The officer gathered personal details on Doreen and Neville, the teenager's parents, as well as intelligence that Mr Ellison said gave the force "a secret advantage" over the family in the inquiry.

The report follows allegations, made by former undercover officer Peter Francis after an investigation by the Guardian and Channel 4's Dispatches, that Met chiefs ordered officers  find 'dirt' that could be used against the Lawrence family.

Coun Osland, who will not stand for re-election in the council elections in May, denied any knowledge of the spying operation when the allegations were first published in June.

He said: "I was not aware of the alleged activities of the unit around the Lawrence family and I do not know the officer allegedly involved.

"The unit was not in my line of command. I would not have requested or authorised any such activity myself and I cannot comment further as I do not know the details of the issues raised."

Coun Osland, who retired from the force in 1993, was the third highest ranking Met officer at the time of the murder. His seniority and role in the Lawrence murder investigation make it inevitable he will be called to give evidence to new inquiry, announced yesterday.

Mr Ellison said an internal review, ordered by Coun Osland, of the Met's initial murder investigation "resulted in an anodyne and uncritical report when criticism had been merited."

He added: "This had resulted in a flawed and indefensible report that had been deliberately ‘toned down’.

"As a result, the family and the public were presented with the wholly misleading and incorrect picture that the investigation had been a proper and  professional one."

The home secretary yesterday announced plans for the introduction of a new police corruption law, prompted by the "shocking findings" contained in Mr Ellison's report.