go to citizens advice and see what they see , it sounds as though they are taking the p!ss i reckon , are you still paying to the council or has it changed hands to a housing association ??????????
is it deffo the lock and not the key ??????????
looks as though you are stuffed , see the attachment
assuming it is a wooden door , you should be able to get a new lock for around £10 , just check your contents policy to see whether it states if it has to be a 5 lever british standard one or not
if you are going to change it then make certain of this fact otherwise if you have a break in the insurance wont pay out even if they didnt get in through the door