The surprise move came after the first meeting between the ruling Labour group on the council and Helen Liddell, the new MP for Monklands East, who last July won a narrow by-election victory in Mr Smith's former constituency 10 miles east of Glasgow.
In recent years Monklands councillors have been accused of sectarian discrimination in spending policies in favour of the mainly Catholic town of Coatbridge against its mainly Protestant neighbour Airdrie. There have also been claims of nepotistic recruitment practices to council jobs and political corruption. None of the allegations has been proven but the 'Monklandsgate' scandal proved a severe embarrassment to Mr Smith and Labour.
The issue dominated the by-election campaign during which Mrs Liddell took on the council, calling for a public explanation of its spending policies. On Monday, Mrs Liddell met Allan Stewart, the Scottish local government minister, and urged him to call a public inquiry. When he refused she persuaded councillors to order and pay for their own investigation.
Last night Jim Brooks, the council leader, said the council would fund the inquiry, which would conducted by a senior lawyer and take evidence in public. He was relieved, he said, that 'for the first time everything will be out in the open. For the past two years we have been the victims of vicious and unsubstantiated rumours and smears. The people who have made allegations against us will now have the chance to make those claims in public and we will be able to see those claims for what they are worth.'
Mr Brooks went on: 'At last we have the chance to get on with our lives and continue the important business of attracting investment which is vitally needed in this area, without being hampered by innuendo. The people deserve this inquiry and the council is happy to fund it.'
Mrs Liddell said the investigation marked 'the beginning of the end of the bad days for Monklands District Council'. She refused to say who would conduct the inquiry and declined to comment on suggestions that Mr Smith and the Labour Party should have called an inquiry sooner.