- Huge row over Unite union trying to seize control of Labour candidates
- The trade union, Britain?s biggest, is by far the party's largest donor
- Election campaign chief Tom Watson quits over links to scandal
- Labour bans unions from paying party subs for new members
- Two members suspended over allegations in Falkirk
By Matt Chorley and James Chapman
PUBLISHED: 03:24 EST, 5 July 2013 | UPDATED: 10:36 EST, 5 July 2013
The union vote-rigging scandal which threatens to engulf Ed Miliband's leadership took a dramatic twist today as the Labour party called in the police.
A damning report into the role Unite played in trying to influence the selection of Labour candidates is expected to be handed to officers later today.
It comes as the bitter war of words between Mr Miliband and Unite's general secretary Len McCluskey escalated.
War of words: Ed Miliband's leadership of Labour has been rocked by the row with the party's biggest union donor, Unite whose general secretary Len McCluskey (right) says he has 'no trust' in the party machine
Mr Miliband faces the biggest crisis of his leadership after his election campaign chief quit and serious questions were raised over the future of Labour?s biggest trade union paymaster.
Unite is accused of flooding the Falkirk party with members in an attempt to influence candidate selection.
It is understood an internal party report into problems in the seat did not find serious wrongdoing.
But a further investigation by Labour General Secretary Ian McNicol uncovered 'new evidence' which sparked alarm in the party and led to the decision to call in the police.
The party is now in talks with the Procurator Fiscal in Scotland about how to take the case forward.
Mr Miliband, who is understood to be angry about the damage being done to his party's reputation, said: 'I'm determined to uphold the integrity of the Labour Party, decent Labour Party members, decent trade union members, and there is no place in this party for any malpractice, bad practice or even corrupt practice.
'That's why we have taken this matter so seriously, and now the matter has been referred to the police.'
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On whether criminal charges could arise, Mr Miliband went on: 'That's why we've referred it to the police because we want the police to investigate whether a criminal activity has taken place in relation to membership irregularities.
'At every stage of this process we have acted thoroughly. When we first had complaints we suspended the selection process.
'I think that Len McCluskey hasn't behaved well in this process. I think he should have faced up to the serious concerns that there were in Falkirk. I think he had at least some awareness there were deep concerns about what was happening in Falkirk.'
But Unite's Mr McCluskey hit back: 'The Labour leadership have shot themselves in the foot and created this media storm over what is a genuinely irrelevant issue to ordinary British workers.
'As far as Unite are concerned, we have done nothing wrong. We are being attacked mercilessly by the media.
'It is a nonsense and I am afraid the way it has been handled by the Labour Party headquarters is nothing short of disgraceful.'
The row has engulfed Mr Miliband;'s leadership and triggered the resignation of his election campaign chief
Tom Watson, deputy party chairman and general election coordinator, last night resigned amid explosive allegations that membership lists were fiddled to try to parachute his friend and office manager Karie Murphy into the plum Commons seat.
Mr Miliband tried to contain the spiralling vote-fixing scandal by suspending Miss Murphy, who is also a close friend of Mr McCluskey, militant leader of the trade union Unite, Labour?s biggest financial backer.?
Stephen Deans, the head of the union in Scotland, was also suspended from the party pending further inquiries.
Q&A: WHAT IS THE ROW ALL ABOUT?
What is going on?
There is a battle for control of the Labour party between leader Ed Miliband and the unions, most significantly Unite and its general secretary Len McCluskey.
What has this got to do with Falkirk?
The safe Labour seat has become vacant after the MP Eric Joyce quit the party after being arrested for assault. Labour needs to find a candidate for the 2010 election.
What has happened?
The row was triggered by allegations that Unite paid for dozens of people to join the local party in Falkirk - possibly without their knowledge - in order to swing the vote and ensure its preferred candidate Karie Murphy won.
Why has Tom Watson resigned?
The larger than life Labour MP quit as the party's general election co-ordinator over his links to Unite. Miss Murphy is his office manager and he used to share a flat with Unite's Len McCluskey. It is unclear how widespread the scandal will spread.
Why does this matter?
The idea of Labour being in hoc to the unions remains toxic for many voters. Unite has given more than ?8million people to the Labour party since Mr Miliband became leader and has boasted of its intention to secure a more left wing agenda. He only beat his brother for the Labour leadership in 2010 because he won the support of unions.
The Conservative MP Henry Smith was preparing to ask the police to investigate any criminal wrongdoing, including whether people's names were added to membership lists without their knowledge.
He wrote to Chief Constable of Scotland, Sir Stephen House saying: 'I am deeply concerned that a serious offence may have been committed in this instance.'
In an attempt to contain the crisis Labour announced it would hand its internal report into Falkirk and 'other evidence' to the police this afternoon.
A Tory party spokesman said: 'This is followship not leadership from Ed Miliband.
'Why didn?t he refer Falkirk to the Police days ago? The answer is that Henry Smith, a Conservative MP, yesterday wrote a public letter to the Chief Constable of Scotland, calling for a fraud enquiry.
'So weak Ed Miliband has been forced to hand himself in.'
Earlier The Labour leader appeared to suggest Mr McCluskey should consider resigning over the affair, adding: 'Instead of defending what happened in Falkirk, Len McCluskey should be facing up to his responsibilities.
'He should not be defending the machine politics involving bad practice and malpractice that went on there, he should be facing up to it.'
The row centres on the process of finding a new Labour candidate for the Scottish constituency of Falkirk, after MP Eric Joyce resigned from the party.
The alarm was raised after as many as 200 people joined the constituency party.
Under Labour rules - which have since been suspended - unions could sign up and pay the subscriptions costs of new members for up to a year.
Labour party sources insisted: 'People who sign up must do so knowingly and willing to join the party and not with any conditions attached.'
The Falkirk allegations centre on whether people were signed up as members without them knowing or had their fees paid in return for backing Unite's preferred candidate, Miss Murphy. 
Mr McCluskey had called for an independent inquiry to be held.
But Angela Eagle, the shadow leader of the Commons and a close ally of Mr Miliband, today dismissed the idea.
She said: 'It?s up to the leader of the Labour Party, not anyone else, to decide to take the action that we?ve taken to ensure that our rules are followed.
'So people can have an opinion, about what action to take, but the leader and the general secretary of our party have made these decisions.'
She told BBC Radio 4 she was 'proud' of Labour's links to the trade unions, but insisted the party 'will not tolerate the kind of behaviour we have seen in Falkirk'.
She added: 'There is sufficient evidence of misbehaviour amongst particular individuals up in Falkirk to justify the action that the leader of the Labour party took yesterday.
'What we?re doing is protecting the integrity of our rulebook, and we?re determined to uphold the integrity of Parliamentary selections. In this particular example in Falkirk we have sufficient evidence of misbehaviour and abuse of membership for us to proceed in the way that we have.'
The controversy raises uncomfortable questions for Mr Miliband over who really controls Labour ? and what would happen if Unite stopped funding the party.
The union, which has given Labour ?8.4million since Mr Miliband became leader thanks to its bloc vote in the 2010 contest, denies wrongdoing and has suggested it could take legal action.
Labour sources say at least seven people in Falkirk were shocked to discover that they had been signed up as party members without their consent, giving them voting rights in the selection of the Labour candidate.
Quit: Tom Watson resigned from the shadow cabinet as Labour's general election chief, just 24 hours after Ed Miliband had to defend him in the Commons
Mr Miliband had been under growing pressure to axe 46-year-old Mr Watson as deputy chairman and election co-ordinator because of his strong union links, and the fact that his assistant was a potential candidate in the constituency where vote-rigging allegations emerged.
But the Labour leader had appeared determined to stick with the combative shadow minister.
A crib sheet for his appearance at Prime Minister?s Questions on Wednesday, accidentally left by an aide in a Westminster toilet, suggested he would have insisted if challenged on the issue that he would stand by Mr Watson.
In a bizarre letter yesterday to Mr Miliband, Mr Watson wrote: ?As you know, I offered my resignation on Tuesday and you asked me to reconsider. I?ve thought about it and still feel it is better for you and the future unity of the party that I go now.?
Today Mr Watson said that his departure was driven in part by other shadow cabinet ministers briefing against him because of his role in the so-called ?curry house plot? in 2006 which forced Tony Blair to declare his intention to quit Number 10.
Speaking to BBC Radio WM, Mr Watson added: 'What I don't want to do is make that a problem. I think I can do things from the backbenches that are as effective and serve my constituency just as well, maybe better. So, no hard feelings, I'm off.?
Mr Watson said that the Conservative portrayal of Unite as being in control of Labour was ?just not true?, and insisted that trade unions in fact have little influence in the party.
?We've got to sort these arrangements out - clearly something had gone wrong in Falkirk that needs sorting out - but I think David Cameron's portrayal of the situation, that everyone is in hock to Len McCluskey, is just not true.?
'ED, I BACK YOU AS LEADER - BUT YOU SHOULD GO TO GLASTONBURY'
A trip to the Glastonbury festival appears to have played a key part in Mr Watson's decision to resign from the Labour shadow cabinet.
In an earlier blog this week he took a swipe at his colleagues, notably shadow defence secretary Jim Murphy, who would be unable to 'share in the communal love' of listening to the Sheffield punk duo Drenge.
In his resignation letter, Mr Watson goes further and chides Labour leader Ed Miliband for not attending music festivals.
He wrote: 'I said Labour leaders can?t be seen standing in muddy fields listening to bands.
'And then I thought how terribly sad that this is true. So: be that great Labour leader that you can be, but try to have a real life too.
'And if you want to see an awesome band, I recommend Drenge.'
He went on to praise Mr Miliband?s ?Buddha-like qualities of patience, deep thought, compassion and resolve?, but suggested it was a shame he had been unable to attend the Glastonbury festival and recommended that he listen to Drenge, a little-known blues rock band from the Peak District.
The Labour leader wrote back to say that he believed ?it does now make sense for you and for the party for you to step down?.
Announcing the suspension of Miss Murphy and Mr Deans, Labour said it was also ending a scheme which allows unions to pay the subscriptions of new members for one year, admitting it had become ?open to abuse?.
Mr Miliband?s spokesman said he believed Mr Watson?s assurances that he had not personally broken any rules ? and insisted he had seen no evidence to suggest that. But he said it did appear that Unite had ?done wrong?, adding of Mr McCluskey: ?He is the general secretary. He obviously needs to take some responsibility for what he has done.?
Responding to suggestions that it was high risk for Mr Miliband to row publicly with his biggest financial backer, the spokesman insisted: ?We are not going to be pushed around.?
He declined to comment on gossip that the union boss and Miss Murphy had been romantically linked.
Conservative Party chairman Grant Shapps said Mr Watson?s resignation was a ?clear vote of no confidence in Ed Miliband?s weak leadership from the man he brought in to run his campaign?.
?But this still doesn?t change the fact that Len McCluskey?s Unite union is taking over the Labour Party,? he added.
?Ed Miliband is not in control of his party. He?s too weak to stand up to Len McCluskey, too weak to stand up for hardworking people and too weak to run the country.?
Rock: Mr Watson used his resignation letter to extol the virtues of the Sheffield punk duo Drenge
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