His draconian action followed the publication on Monday of a report by Professor Robert Black QC into the employment practices and spending policy of the council near Edinburgh, which accused Labour councillors of employing their relatives and of spending more on mainly Roman Catholic Coatbridge than Protestant Airdrie.
Tom Sawyer, general secretary of the Labour Party, announced the suspension after John Major used the report against Mr Blair in the Commons: "Here with this report on Monklands we have a clear case of how Labour in office actually runs its own affairs
The Prime Minister challenged Mr Blair: "If you are so concerned about open government, will you indicate today that you will actually publish the earlier secret report held by the Labour Party into Monklands council?"
George Robertson, Labour's Scottish affairs spokesman, immediately wrote to the Prime Minister demanding, "as a matter of honour", that he retract his statement and "apologise to me and to the House". He said Labour had published its inquiry in 1993, and that he had no more unpublished information.
The 1993 report admitted that practices in the local Labour party and the district council laid Labour councillors open to criticism, but no action was taken against them. The area was represented by John Smith, the late Labour leader, and by Tom Clarke, then Labour's Scottish affairs spokesman.
Last year, under pressure from, among others, Helen Liddell, Mr Smith's successor as MP for Monklands West, the council asked Professor Black to conduct his inquiry. As a result of his report, some of the allegations have been referred to the Crown Office in Scotland for possible prosecution.
Alex Salmond, the leader of the Scottish National Party, criticised Mr Blair for failing to suspend Jim Brooks, Monklands council leader, and several of his colleagues from the new North Lanarkshire council, elected in April, which takes over from Monklands next year. He is writing to Mr Blair to ask whether Labour leaders knew about the malpractices two years ago.
Mr Salmond also attacked Ian Lang, Secretary of State for Scotland, for failing to order an inquiry into the affair. "It suits the Conservatives to keep the scandal going," he said.