Ed Miliband is facing accusations by the head of Labour's biggest trade union donor that it is the victim of a party "smear" campaign after the Falkirk selection controversy escalated into a full-blown public bust-up.
Unite general secretary Len McCluskey said he had "no trust" in the party's handling of the affair as the Opposition leader's chief election co-ordinator resigned over the issue and two party members were suspended.
In an incendiary letter to Labour's general secretary Iain McNicol, he said a party inquiry into claims the union tried to stitch up candidate selection was a "disgrace" and demanded an independent inquiry.
"I am obliged to uphold the integrity of Unite, and I can no longer do so on the basis of going along with the activities of a Labour Party administration in which I can place no trust," Mr McCluskey wrote.
"I will therefore be publicly proposing that an independent inquiry be held into all circumstances relating to Falkirk CLP and the conduct of all parties involved."
His intervention further stirred the seething dispute over allegations that Unite crammed the constituency party with 100 or more members whose subscriptions were paid by the union, some of them without their knowledge.
In an afternoon of fast-moving developments, Tom Watson stepped down as Labour's deputy chairman and left the shadow cabinet, saying that he was quitting to safeguard "the unity of the party".
In his resignation letter, Mr Watson revealed that he offered to resign on Tuesday, but was asked by Labour leader Ed Miliband - to whom he said he remained loyal and considered could be an "outstanding" prime minister - to "reconsider".
And he risked embarrassing the Labour leader further by calling for an internal report into the controversy to be published - something Mr Miliband has refused to do.
As he fought to control the crisis, Mr Miliband announced he was suspending two members of the Falkirk party - constituency chairman Stephen Deans and Karie Murphy, Mr Watson's office manager who was Unite's favoured candidate for the seat.
Labour said that there were allegations that the pair may have been involved in a breach of Labour Party rules relating to "potential abuse of membership rules".
Mr Miliband also said he was ending the Union Join scheme, established in the Blair era, under which trade unions encouraged their members to join the party and were allowed to pay their subs for the first year.
In a direct challenge to Unite, Mr Miliband said he would not allow abuses of membership or selection in "my party".
"I am incredibly angry about what's happened in Falkirk because I feel that the good name of Labour Party members, trade union members and the Labour Party have been besmirched by the behaviour of a few individuals," he said.
"That's why we suspended the local party, that's why we have now suspended two individuals and that's why we are also clear that we are closing down the scheme that allowed this abuse to happen.
"I want to be very clear about this: I am not going to have abuse of membership procedures, of parliamentary selections, in my party.
"That is very clear and I want to be clear about that for the leadership of Unite the Union in particular."
Mr Miliband said it was his decision that Mr Watson should now go as he had become a "distraction".
"I came to the conclusion at lunchtime today that it was right that he went and I spoke to him and said that," he said.
Mr MrCluskey complained that he had not been shown the "flimsy" internal inquiry report which he said "has been used to smear Unite and its members.
"Even if the allegations of people being signed up to the party without their knowledge were true, this had nothing whatsoever to do with my union," he said.
"It is noteworthy that members of the shadow cabinet have been in the lead in initiating this attack upon Unite. Have they had sight of this report while I, the leader of the union put in the frame, has not had the courtesy of a copy?"
Unite would "co-operate fully" with an independent investigation and "draw appropriate conclusions from any findings regarding our own behaviour", he said.
"I trust that you will support such an inquiry, will direct all Labour Party employees to cooperate with it and encourage other individuals to do likewise," he added.
Conservatives have capitalised on the Falkirk row, with David Cameron repeatedly goading Mr Miliband in the Commons yesterday over the influence allegedly wielded by Unite, which has donated more than £8 million to Labour since he became leader.
And the Trade Union Reform Campaign - a pressure group backed by several Tory MPs - wrote to the trade union Certification Officer demanding an investigation into what it claimed was fraud in Falkirk.
Labour's shadow leader of the Commons Angela Eagle - a member of the party's ruling National Executive Committee - said Mr McCluskey was entitled to express his "opinion", but it was Mr Miliband who would decide what should be done.
Ms Eagle told BBC Radio 4's Today programme: "What we are doing is protecting the integrity of our rulebook. We are 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.
"It's up to the leader of the Labour Party, not anyone else, to decide to take the action 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, the NEC will be looking at this too.
"Outside of that, it's nobody's duty but ours to deal with this issue."
Asked whether Mr Miliband should comply with Unite's call for the internal inquiry to be released, Ms Eagle said: "Len McCluskey can have an opinion on that, but it is the internal party Labour structures which will decide on how we protect the integrity of our rules.
"This is not about the Labour Party administration. We are proud of our link to the trade unions because it connects us with millions of ordinary working men and women up and down the country.
"We will not tolerate the kind of behaviour we have seen in Falkirk, whoever is responsible for it. 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."
Responding to Ms Eagle's comments, Labour's former general secretary Peter Watt - who held the post from 2005 to 2007 - said on Twitter: "If Labour attempts to blame Falkirk just on 'particular individuals' rather than accepting institutional problem it will be a disgrace."
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