The programme was due to be screened tomorrow, 10 days before the municipal elections. It follows up the district auditor's report that found Dame Shirley Porter's ruling group spent millions of pounds 'buying' victory in elections four years ago, and makes fresh allegations about gerrymandering.
According to people involved in the film, it was checked under the special procedures laid down for sensitive programmes and had been lawyered. Producer Mark Killick and reporter John Ware - who made the 1989 Panorama which led to the district auditor's investigation - were told on Friday after it had been referred to the director general, John Birt, that the programme was on hold.
Councillor Andy Dismore, leader of the Labour group, said:'There must have been political interference with the BBC to stop them broadcasting it. It is a piece of pusillanimity on the part of John Birt.'
Conservative Central Office is said to have complained while the pounds 80,000 film was being made. A spokesman said last night:'We are not commenting, I am afraid.'
A BBC spokeswoman said last night: 'There is no question of it being dropped. The film is unfinished, and no date has been set for its transmission.'
The BBC was criticised before the last general election when a Panorama on the recession was 'pulled.'