Labour will discipline two Falkirk union ‘vote-riggers’ despite lack of evidence, as Unite calls for reinstatement

Party will move against the pair despite police finding no grounds for criminal investigation

Ed Miliband had referred the controversy over elected candidates to Scottish police (Getty Images)

Labour has vowed to take urgent disciplinary action against two of its members over alleged vote-rigging in Falkirk by Britain’s biggest trade union even though the police decided there were no grounds for a criminal investigation.

The ruling by Scottish Police was a setback to Ed Miliband, who referred the controversy over selecting Labour’s parliamentary candidate to them earlier this month. A spokeswoman said: “Following a comprehensive review of all material submitted, Police Scotland has concluded there are insufficient grounds to support a criminal investigation at this time. However, should further information come to light this will be looked into.”

Labour officials were surprised by the verdict, as they believe a paper trail warranted a fraud inquiry. They suspect the police dropped the case because they found no evidence of financial gain – unlike in the investigations into MPs’ expenses – even though the winner of the selection contest would potentially land an MP’s salary of more than £66,000 a year. Officials also think the police may have been reluctant to become embroiled in politics after the Metropolitan Police’s marathon inquiry into “cash for honours” under the Blair Government resulted in no charges being brought.

The allegations centre on claims that the union recruited members to the local party – some without their knowledge – and paid their membership fees under a now-disbanded scheme approved by Labour.

Labour insisted that Stevie Deans, chairman of both Falkirk Labour Party and Unite in Scotland, and Karie Murphy, the union’s favoured candidate, would remain suspended from the party. It said: “As a result of the police decision, we will now pursue disciplinary action as a matter of urgency. The internal Labour inquiry found there was enough evidence to concern us about membership recruitment in Falkirk. We will act on this swiftly and thoroughly, as we have done throughout this matter.”

The union said: “Unite welcomes the police decision not to investigate the Falkirk selection, which appears to be based on an overdue application of common sense to the situation. Unite reaffirms what it has always said – the union broke neither Labour Party rules nor the law in Falkirk. Those in the media who have smeared the union without evidence or justification should now hang their heads in shame.

“We would hope that Labour will now lift the suspensions of Stevie Deans and Karie Murphy, agree to an independent investigation into what happened in Falkirk, and restore full rights to the constituency party as soon as possible.”

Another independent inquiry will be launched into the affair. The office of the Information Commissioner has told the Conservative MP Jake Berry it will investigate his concerns about “the alleged purchase of multiple Labour Party memberships for Unite members living in the Falkirk constituency”.

Labour rejected Tory calls to publish its internal report on the selection contest. Grant Shapps, the Tory chairman, told Mr Miliband in a letter: “Following Police Scotland’s announcement that they will not be undertaking a criminal investigation into the Falkirk selection scandal, there is now no legal impediment to the publication of the Labour Party’s internal report.”

Accounts published today by the Electoral Commission showed that union affiliation fees accounted for almost £8m of Labour’s £33m income in 2012. Labour’s figure was about £2.5m more than the combined income of the Tories (£24.2m) and Liberal Democrats (£6m).

Labour’s membership dropped from 193,961 in 2010 to 187,537 last year. The number of Lib Dem members fell from 65,038 in 2010 to 42,501 last year, reflecting opposition to the decision to join the Tories in coalition.

The Tories do not reveal how many members they have. Their accounts show that income from membership fees fell to £747,000 last year, down from £863,000 the previous year.