Edinburgh City Council's 27-year-old policy of licensing the "saunas" is in tatters after Scotland's new single police force used "tackety-boots'' to shatter the capital's arrangement.
Now senior council figures are privately discussing the radical option of taking saunas and massage parlours off the official list of establishments requiring a licence to operate. That would mean "they would have to take their chances with the police", one insider said.
Since the mid-1980s, the local authority in Edinburgh has granted public entertainment licences to saunas widely known to be used by sex workers.
The "blind eye" policy was an attempt to manage prostitution and tackle the city's HIV infection rates.
However, the new single police force, led by Chief Constable Sir Stephen House, raided a number of the saunas in June, action that resulted in 10 people being arrested for brothel-keeping and living off immoral earnings.
The council, a Labour-SNP coalition, then suspended the licences of six establishments: Paradise, The New Gentle Touch, the Dundas Street Sauna, Scorpio Leisure, Blair Street Sauna and New Town Sauna.
With half of the city's saunas threatened by closure and the other half facing an uncertain future, the long-established licensing policy is in disarray.
The Sunday Herald can reveal senior councillors and officials are examining whether the local authority should now stop licensing the brothels.
Saunas and massage parlours are explicitly mentioned in the council's "public entertainment resolution", which lists the type of activity that has to be regulated. The list also includes premises for go-karting, fireworks displays, circuses and raves.
Although the resolution was approved again recently, councillors could strike saunas off the list as a response to the growing crisis over the licensing policy.
One senior local authority source cited two reasons for the option being considered.
The first is that the changing nature of the sex industry means men are increasingly going online to purchase sex in flats, rather than just in saunas. It has been estimated that 300 women are selling sex from private flats in the city.
The council insider said the internet had "bypassed" the licensing regime.
Secondly, licensing saunas can only work if the public bodies in the city agree on the policy, a consensus shattered by Police Scotland.
The source said the status quo is now increasingly untenable. "If we continue as before, we will be constantly challenged in court and in committee."
If the rethink is agreed, it could result in saunas operating on an unregulated basis."They would have to take their chances with the police," the insider said.
A second senior source confirmed that abandonment of the "blind eye" policy was being actively considered by councillors.
This newspaper revealed recently that the council was anticipating the closure of some of the saunas by reviewing the services that are available to sex workers.
The local authority is looking to put together a range of services to help prostitutes whose work at the saunas is coming to an end.
Meanwhile, sauna bosses last week abandoned plans to appeal against the suspension of their licences. Six saunas are expected to close within weeks.
A threat to reveal a list of public figures who have visited the massage parlours - a so-called "hypocrisy hit list" said to include police officers, lawyers and celebrities - has not so far materialised.
Lothians MSP Margo MacDonald, who supports the licensing of saunas, said: "I know that this option [abandoning the policy] is being considered. Stephen House promised that the single force would still have local policing, but there has been nothing local in the approach.
"He has taken a developed policy that has had the acquiescence of civic society and destroyed it. It has been the tackety-boot approach, with Police Scotland acting like the Met on a bad day."
However, Jenny Kemp, the co-ordinator at the Zero Tolerance charity, said: "It's always been a nonsense that Edinburgh's saunas are licensed under the same regime as sunbeds, amusement arcades and funfairs. Buying sex is exploitation, not entertainment. Taking saunas out of this resolution is sensible and long overdue."
Paul Edie, a Liberal Democrat councillor in Edinburgh, said: "The approach traditionally taken by many administrations in Edinburgh has been a realistic one that recognises we are never going to eradicate the sex industry and that licensing saunas allows various partners to work with the workers to try to best ensure their safety and health, working to ensure the least worse outcomes.
"I am concerned that the approach suggested would increase street prostitution, which is far more dangerous and would drive much of this activity underground."
A Police Scotland spokesman said: "As part of our commitment to keeping people safe, we regularly undertake inspections of Edinburgh's licensed premises with partner agencies and report all offences to the appropriate authority.
"Any business operating within the capital will continue to be subject to these inspections."
A council spokesman said: "These premises remain licensed and in due course the council will determine the outstanding applications to renew these licences."