A leading consultant paediatrician suspended from his hospital post for almost two years over allegations that he put the safety of babies and children at risk was celebrating on Friday night after hearing that he had been reinstated.

Professor David Southall, who was sent home on full pay by the North Staffordshire hospital trust in November 1999, has been cleared of all charges by the £750,000 inquiry into his work. The trust said in a statement Friday: "No case to answer has been found in respect of professional misconduct or incompetence."

The decision marks the end of a nightmare for Professor Southall, who has been hounded by a vociferous lobby of aggrieved parents over his child protection work.

It is a severe embarrassment for the trust, which has been accused of taking too long to investigate the allegations against him, and of the Department of Health, which ordered an official inquiry into a separate part of his research involving the use of a new type of ventilator on premature babies. Professor Southall and a colleague, Dr Martin Samuels, were forced to stop work after they were accused by parents of harassment and victimisation. The allegations related to their work in child protection in which they pioneered the use of covert video surveillance of suspected abusers.

The claims were made in early 1999 by a group of parents led by Penny Mellor, who runs a support line for parents accused of Munchausen by proxy.

The consultants were also the subject of a separate inquiry into the ventilator research trial on premature babies known as the CNEP study (Continuous Negative Extra-thoracic Pressure).

That inquiry, by Professor Rod Griffiths, of Birmingham University, which reported in May, criticised the research, claiming parents had been misled and monitoring of the project was unsatisfactory.

But Department of Health officials are known to have had strong reservations about the quality of the report and demanded extensive rewriting, which delayed its release. The inquiry report was later attacked in the British Medical Journal, which concluded that the real scandal at the hospital was "what has been done to, not what was done by, the medical and nursing staff". Dr Samuels was reinstated in April.

The North Staffordshire Trust had planned to announce Professor Southall's reinstatement at a press conference next week but that was cancelled and a statement hastily issued yesterday afternoon.

The Department of Health is understood to have been angered when it saw a copy of the statement the trust planned to issue, which has been seen by The Independent, and demanded changes. The amended statement includes extra references designed to bolster the discredited Griffiths report and says there are "lessons to be learnt" from the episode.