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Speaking in parliament, Home Secretary Theresa May said the government was considering investigating the local council in the northern English town, and specifically whether "institutionalised political correctness" - or a fear of being branded racist - was to blame for the cases being mishandled.
May spoke as the police force in South Yorkshire, the county where Rotherham is located, launched an independent investigation into its own handling of the cases and the opposition Labour party suspended four local councillors.
The scale of the abuse, between 1997 and 2013 - in which girls as young as 11 were plied with drugs and alcohol and subjected to gang rapes - was revealed by an independent report published last week.
The case has divided people in Rotherham, a poor town just outside the city of Sheffield which was once known to the world as a prospering hub of Britain's steel and coal industries.
Some residents believe a timidity about confronting the racial aspects of the abuse prompted authorities to turn a blind eye, while others believe that is just being used as an excuse to cover up rank incompetence.
May described the report into the scandal as an account of the "terrible failures by Rotherham Council - and by the police and other agencies - to protect vulnerable children."
"It was a complete dereliction of duty," she said, promising that the government would act on the report to bolster existing procedures designed to protect children.
Britain has already been shocked by a string of high profile historical child sex abuse cases involving celebrities such as Jimmy Savile, who was posthumously found to have been one of the country's most prolific sex offenders.
May said the findings of the Rotherham report would feed into an existing inquiry into allegations that British public institutions failed to protect children from child sex abuse.
She spoke as South Yorkshire Police launched its own separate independent investigation to try to identify wrongdoing or failings by its officers. It said the investigation was necessary to restore public confidence in the force.
Labour said it was suspending four councillors who held senior roles in the local administration at the time of the abuses pending further investigation.
"Further action against others in position of responsibility at the time may follow," the party said in a statement. "Those responsible must be and will be held to account."