WordPress Page Template not paginating Posts

WordPress Page Template not using pagination, work display the next and previous links to go back and forth between latest and oldest posts, along with that putting /page/2 just displays the same post too.

Here’s the code:-

<div id="homeContentLeft">

            <h1>Latest Posts</h1>
            <?php
            rewind_posts();
        $paged = (get_query_var('paged')) ? get_query_var('paged') : 1;
        $args= array(
            'posts_per_page' => 1,
            'cat' => 1,
            'paged' => $paged
        );
        query_posts($args);
            ?>

            <?php if (have_posts()) : ?>

            <?php while (have_posts()) : the_post(); ?>

            <div class="entry">

                <a href="<?php the_permalink() ?>">
                    <div id="homeNewsThumbnail">
                        <?php
                            if ( has_post_thumbnail() ) { 
                                the_post_thumbnail('thumbnail');
                            } 
                        ?>

                        <div id="homeNewsBoxDate">
                            <large><?php the_time('j') ?></large>
                            <small><?php the_time('M') ?></small>
                        </div>

                    </div>
                </a>


                <div id="homeNewsBox">

                    <h2><a href="<?php the_permalink() ?>" rel="bookmark" title="Permanent Link to <?php the_title_attribute(); ?>"><?php the_title(); ?></a></h2>

                    <?php echo substr(get_the_excerpt(), 0,320); ?>...

                    <readmore> <a href="<?php the_permalink() ?>">> Read More</a></readmore>
                </div>

                <div style="clear:both"></div>

            </div>


            <?php endwhile; ?>
            <?php wp_reset_query();?>
            <div class="alignleft"><?php next_posts_link('&laquo; Older Entries') ?></div>
            <div class="alignright"><?php previous_posts_link('Newer Entries &raquo;') ?></div>
            <?php else : ?>
            <h2>Not Found</h2>
            <div class="inner-entry">
                <p>Sorry, but you are looking for something that isn't here.</p>
            </div>
            <?php endif; ?>
        </div>  

Any help would be greatly appreciated!

Thank you

~ Kind Regards