Labour Falkirk row: Ed Miliband retreats over allegations against Unite union after vote-rigging claims withdrawn

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The reinstatement of two Labour Party members following allegations of vote-rigging by the Unite union in a parliamentary selection contest in Falkirk forced Ed Miliband to make an embarrassing retreat last night.

Claims that union members were signed up in the Scottish constituency without their knowledge in order to support Unite’s favoured candidate, Karie Murphy, have been withdrawn after complainants changed their evidence.

In a major climbdown by Labour, Ms Murphy was allowed back into the party last night, along with Stevie Deans, chairman of the local party in Falkirk and Unite in Scotland.

They had been suspended by Labour during its own investigation, but the Scottish police found no grounds for a criminal investigation in July after the party referred the case to the authorities.

It was this bitter dispute that formed the catalyst for plans by the party leader, Mr Miliband, to recast the relationship between Labour and its trade union founders. He wants union members to “opt in” to affiliating to the party rather that the present system of “opting out” if they do not wish to support it financially.

Nevertheless, Mr Miliband’s aides vowed that his radical reforms will go ahead – even though furious union leaders have begun to cut their cash support to Labour, which could provoke a financial crisis for the party at the 2015 election.

The row also cost Tom Watson – who employed Ms Murphy as his Commons office manager – his post in the Shadow Cabinet as Labour’s election co-ordinator.

He said: “These members have had their lives turned inside out by a media frenzy based on an inaccurate report. I’m glad the party has finally done the right thing.”

It is believed Labour’s inquiry found that Unite’s decision to pay the party membership fees of some new members was within the party rules. The “union join” scheme, introduced when Tony Blair was Labour leader, has been scrapped by Mr Miliband.

A Labour spokesman said yesterday: “Since Labour began its internal process, key evidence has been withdrawn and further evidence provided by individuals concerned.

“Karie Murphy and Stevie Deans, who were suspended, will now be reinstated as they have not been guilty of any wrongdoing. No organisation or individual has been found to have breached the rules as they stood at the time.” Ms Murphy said: “Developments in Falkirk have left me shocked and saddened, but I have acted throughout in what I believe was in the interest of the party.

“I believe my continued presence in the Falkirk arena detracts from achieving that goal. I have met colleagues from both Unite and the Labour Party and agreed that reconciliation and unity are paramount.”

However, the Conservative Party chairman, Grant Shapps, said: “It’s clearer than ever that Len McCluskey [the Unite leader] is calling the shots in the Labour Party. If Ed Miliband is too weak to stand up to his union paymasters, how can he stand up for hard-working people? Ed Miliband must publish Labour’s report into the Falkirk selection in full.”