Half a mile from Harvey Nichols in the thriving and increasingly stylish centre of Leeds - powerful proof of the city’s economic resurgence in financial services - lies one of the poorest estates in Britain. Little London rises on a northern incline, cordoned off by four-lane trunk roads, poverty and drug-related crime, isolated by low self-esteem and a lack of any kind of facilities.

The 1960s high-rise blocks and low-grade rotting maisonettes are separated by rat-run alleyways and vast swathes of rough grass, full of litter, dog mess and burnt-out cars. For years it’s been the happy hunting ground of drug dealers, joy riders and loan sharks. It is the 11th poorest ward in Britain. But there is a jewel in this crown of thorns.

Little London primary school, which finally moved into beautiful new premises last September after an arson attack had condemned it to mobile classrooms for four years, has become a focus of hope for those Little London residents who want things to get better. Until recently, if you had the ambition and the means, you got the hell out the area. These days, people are staying - some have even come back. Locals have developed a feisty, fighting spirit, which has coincided, not by accident, with a rise in the school’s fortunes and achievements.

The school’s latest initiative is a credit union run by parents for parents. Research into the area, conducted by Oxford University for the Church Urban Aid Fund, showed that one of the most worrying social problems was loan sharks. Margaret Martin, a long-serving member of staff who divides her time between teaching Year 5s and building community links, decided that loan sharks were therefore a big issue for the school. “When we ask our parents to read with their kids or come into school and get involved,” she says, “they are less likely to do that if they are sick with the worry of having no money and no bank account, or because the loan shark is waiting outside the Post Office when they cash their family allowance, or hanging around the bottom of the flats.”

Under the rules of the credit union, parents have access to realistic loans at low interest rates. They can be paid back over a mutually agreed period, but first parents must prove they can save - even if it’s only a few pounds a week. As they have to come in each day to drop off their children, Margaret Martin believes school is an obvious and convenient point for depositing savings, however small.

Such initiatives have been supported by the school’s head, Peter Hall-Jones, an energetic young man who arrived six years ago, aged 35, determined to prove that an inner-city school could achieve great things. He faced a struggle - Little London primary had a history of underachievement and aggression from pupils and parents - but during his headship key stage two Sats scores have trebled from 19 per cent to 58 per cent in English and doubled from 27 per cent to 54 per cent in maths. He believes the school will hit 80 per cent scores within two years, despite pupils arriving with a baseline score 65 per cent below the Leeds average.

One of Peter Hall-Jones’s first projects at the school involved sending children to the Leeds college of building for design and technology work, where they learned to make items such as bookshelves. A creative and lateral thinker, he says:“I wanted them to learn to build things, not smash them up - to be constructive, not destructive.

“Of course, all of their work was destroyed in the fire. That was a real low point. Our numbers dropped from 350 to 195 because people believed the school had closed down. But for many parents it was also a galvanising moment. We fought to keep the school open and to have another one built. People took it as a positive sign that the school was saved, that the estate was not going to be let go of. We have tried to make it a source of regeneration, not a victim of degeneration.”

Another of Mr Hall-Jones’s early initiatives was to release Margaret Martin from half of her teaching commitment to work directly in the community. He saw in her a like-minded spirit, someone who believed as fervently as he did that if their pupils were to achieve, the parents needed help to achieve as well.

When he arrived, aggression and violence between pupils were rife. “At one point about 50 children were being sent to me every day,” he says. But Mr Hall-Jones recognised that the negative energy wasted abilities and spirit which could be turned into real achievement. Children who could walk into school on time every morning with a smile on their face, having had no breakfast and possibly living without light or heating - in some cases even a bed - had to have outstanding qualities, and it was his job to harness them.

Similarly, he believes parental anger often stems from anxiety, and that too has to be put to good use. “It’s like Yin and Yang,” he says. “You just take the flip side of all this negativity and away you go.”

Peter Hall-Jones’s achievements have been recognised by higher authorities. He was among a small group of heads recently consulted by Michael Barber, head of the Department for Education’s standards and effectiveness unit, on the way forward for Leeds education authority, which recently failed its Ofsted. And only last month he was taking tea at Buckingham Palace, in recognition of the school’s achievements in creating community and business links. But more crucially for the school, his achievements have been recognised and appreciated by parents.

Jane Scarfe, 35, who has five children, two of them at Little London, is a director of the credit union. She is also looking forward to helping set up a junior savings bank for pupils. “Hopefully, if they learn to save when they are young, they won’t get into the grips of loan sharks when they are older,” she says.

She has not always been so supportive of the school. Indeed, she was one of Mr Hall-Jones’s early critics. “I was one of the first ones to attack him when he said he wanted this school to be the best in Leeds,” she says. “I told him he didn’t know what he was talking about. At that time our community spirit had totally gone. But two weeks ago I apologised to him, because he really has lifted the school by getting parents involved.”

Jane Scarfe has lived on the Servia section of Little London, a cluster of dereliction, for the past 13 years. Although she suffers from chronic ill-health, is in constant pain and walks on crutches, she is an active member of the Servia’s new tenants’ association and a continuous presence in the school. Three years ago her aunt was killed on the estate by joy riders, a tragic event that spurred her into fighting to make life for her family and neighbours more bearable.

She attended a parents’ course at the school, run by Margaret Martin, called “Supporting children in primary school”, accredited by the Open College. Now she attends a parents’ computer course, also at the school, run by the Workers’ Educational Association. Ms Martin is trying to persuade Jane Scarfe and fellow parents Alison Tosney and Diane Hubbard - who hope to start an after-school care club - to take the Open University specialist teachers’ assistant certificate, which will also be managed within the school.

Jane Scarfe believes the school’s belief in relieving parents’ stress as a way of raising academic achievement has worked. “Taking stress off us,” she says, “means we have more time to spend on our kids.”

Alison Tosney, who has a six-year-old daughter at the school and two others who passed through it, was born and brought up in Little London but had moved away because the area had deteriorated so much. She returned because of the vast improvements made by the school. She too is now a familiar figure on the premises, running the school’s breakfast club with Diane Hubbard (who has two children in reception and Year 1), and supervising lunchtimes.

They are both fiercely supportive of the school; Diane Hubbard, who lives close by, has refused to be rehoused even though the house next to hers has been squatted by drug-takers and bags of used needles litter the pavement outside every morning. “There is too much to stay for,” she says. “I have such a good support system now.”

The breakfast club, run in the school hall from 7.30am every day, costs no more than pound;2 per family per day. Margaret Martin secured pound;4,000 from the Community and Mental Health Services Trust to run the club, which Alison Tosney and Diane Hubbard set up with just pound;4. The two parents give the children toast, fruit, cereals and milk, setting out mats for them to sit on as they relax and watch the television. Some children sit in a quiet corner and read, or play with colouring pencils and paper. The atmosphere is homely and calm. And the club has allowed some mothers to start working again, safe in the knowledge that their children are being fed and cared for.

The school had also been providing fruit, toast and milk as a mid-morning snack for all key stage 2 children, but this recently stopped when funding ran out. Ms Martin is busy seeking more cash to revive the scheme. Making sure the children start the day with a full belly has become a priority for the school.

But there are plenty of other initiatives. On Tuesdays, staff from the not-so-distant glossy offices of Arthur Andersen accountants are in at 8.30am helping children with reading difficulties. There are after-school clubs in reading, drama, art, dance and tabla drumming four days a week, and the pupil choir performs all over the city. At any one time, the school has 20 university students mentoring pupils, helping out as classroom assistants and running clubs with parents.

Margaret Martin also takes parents and pupils to the university to take part in the “campus trails”, tours of the university run by students. She sits on a local housing steering group and makes sure the school’s community suite is used to the full for meetings between tenants, councillors and the city’s social regeneration budget unit. This year, the school will receive pound;25,000 of SRB funding. At a recent “Planning for Real” community day held one Saturday at the school and presided over by the MP for Leeds Central, Hilary Benn, Little London residents were invited to add their ideas for improvement to a model of the Little London estate made by parents and pupils.

“The school is giving parents the confidence to tackle the great problems that exist,” says Mr Benn. “It is giving them a real sense of ownership - a foundation for excellence in their children.”

The school has worked successfully from the premise that academic standards cannot be raised without the involvement of the wider community. “Yes, you need good teachers,” says Margaret Martin. “Yes, you need a broad and balanced curriculum. Yes, you need to plan. Yes, you need to match your work well. But alongside that you also need to take into account family self-esteem and factors of employment and training. If you have no self-esteem, you cannot give it to your kids.”

For her, the essence of the school’s work is about giving people choices. “It doesn’t matter whether you go on to be a bin man, work in the local factory or become a doctor, as long as you have done it through choice,” she says. “I chose teaching and I love it to bits. And I want others to have that choice.”