Labour yesterday suspended the leader and deputy leader of Walsall council, claiming they led a "party within a party" and were refusing to open their plans for 50 mini town halls to public consultation or independent scrutiny.
Dave Church and his deputy, John Rothery, were suspended from membership of the Labour Party, along with a third councillor, Brian Powell, by the party's National Executive Committee. Labour councillors will be required to elect a new council leader in the next few days.
The NEC decided, by 21 votes, with left-wing MPs Dennis Skinner and Diane Abbott voting against, that the council leadership had failed to give the required assurances by the deadline of midnight on Tuesday.
NEC member Clare Short, who visited Walsall with John Prescott, the deputy Labour leader, said: "We have no alternative but to take the action that was recommended to the NEC today. When we went to Walsall we believed that we could conciliate, but the people with whom we were negotiating broke their word. We now have evidence of a tight and disciplined group within the party and we have to act."
The NEC decided to investigate charges that a faction called the Walsall Socialist Group was operating secretively within the local party. A Labour spokesman said the group appeared to have a closed membership, by invitation only, that members were alleged to have to pay 1 per cent of their salary in subscription and that it allegedly operated strict internal discipline. The Labour Party's rules ban groups "having their own programme, principles and policy".
Walsall Labour Party has been sharply divided for decades, with a left- wing group, known until recently as the Tribune group, holding power in the early Eighties. The left took control again after May's local elections, with a radical plan to give "power to the people" through more than 50 neighbourhood committees, elected by local people.
In August, the national Labour leadership suspended the Walsall district party organisation and handed a propaganda coup to the new Conservative chairman, Brian Mawhinney, who had visited the West Midlands town to draw attention to the council as an example of "real Labour".
Mr Rothery claimed to be "terribly shocked" by the announcement: "This talk of a tight, disciplined group is not true. Walsall Socialist Group is a discussion group which meets to talk about national issues. It does not have any premises, there is no constitution, there are no rules, there is nothing."
Fifteen of the 34 Labour councillors are believed to be members of the group. A further 15 belong to the rival "moderate" group, while four are non-aligned. With thegroup's strength reduced, a "moderate" is likely to take over the council leadership.
Mr Rothery said the Socialist Group was affiliated to the national Socialist Campaign Group, which claims several Labour MPs as members.
Mr Church and Mr Rothery met Mr Prescott last Thursday and were given an ultimatum to agree to genuine public consultation, looking at all the options, and to "some form of independent validation". A Labour spokesman said they failed to do this.