The move - the first of its kind since the party halted the candidacy of Sharon Atkins in Nottingham East in 1987 - overshadowed the more far reaching decision to reduce the trade union block vote at party conferences to 50 per cent from 70.
The reduction in the block vote, which will now be approved at this year's conference, a year earlier than expected, was further reinforced yesterday when Tony Blair, the Labour leader, reported to the executive that he had already reached "broad agreement" for reform of the present system of union sponsorship of MPs.
The NEC's disputes committee will now hear Ms Davies' defence against two complaints: that she failed to tell the local party that she had been sentenced to prison for failing to pay her poll tax; and that she had indicated she would not necessarily abide by the party whip on all occasions.
Ms Davies yesterday promised to co-operate with the inquiry and said she was "confident of being endorsed by the NEC". She insisted the charges against her were "totally unfounded and mischievous". She added: "Any suggestion that I concealed any part of my political record from party members is utterly false. I resent the slur on my integrity and will not allow it to stand." Ms Davies' poll tax bill was paid by a third party and she therefore did not serve her sentence for the civil offence of non-payment.
The executive also approved a proposal by the party's environment spokesman, Frank Dobson, to give a future Labour government fresh powers to take over departments in unruly councils or those providing provenly inadequate services.
The decision to carry out the investigation of Ms Davies was taken by 17 votes to 6 - a narrower margin than the 22 to 3 decision in favour of reducing the trade union block vote. Those opposing the block vote decision were Dennis Skinner MP, Vernon Hince of the rail union RMT and Derek Hodgson of the postal workers' union.
Welcoming yesterday's decision on the block vote, Mr Blair said the union share of the vote had been reduced from 90 per cent in 1992.
"We have made massive strides to becoming a more democratic, mass membership party in touch with the people of Britain," he said. "I believe the decision ... will broaden and deepen our appeal to a public tired of the Tories.
Asked whether he had given union bosses any assurances, he said: "No. I've always made it clear this is a process of change."
n Labour's opinion poll lead has not been damaged by John Major's leadership victory, according to a MORI poll for the Times today. Labour has a lead of 33 points over the Tories. Their poll rating is 59 per cent, up three from last month, while the Tories down three on 26 per cent.
Another view, page 16
Labour and women, page 17