LABOUR is waging a civil war in its heartlands after sacking a councillor who investigated a multi-million-pound public contract.

The party's ruling North Lanarkshire group has ousted veteran Tommy Morgan from his position as council watchdog after he questioned proposals to rewrite a housing repair deal.

The move has sparked a split that threatens to sour party relations right across western Scotland.

Mr Morgan, who until December was convener of audit and governance, had been for months querying the local authority's £30 million-a-year contract with Mears Scotland - run by Willie Docherty, husband of Glasgow Lord Provost Sadie Docherty.

Mr Morgan declined to discuss his sacking, hinting at a potential legal challenge that could go straight to Scottish Labour leader Jim Murphy to be dealt with.

Sources close to North Lanarkshire Council leader and Labour heavyweight Jim McCabe, who is currently on holiday, insisted Mr Morgan's removal had nothing to do with Mears.

He said: "This case is in the hands of my lawyer so I am unable to comment."

However, another Labour source said: "Tommy has been sacked for being too good at his job."

Mr McCabe's supporters insist that Mears Scotland, in which the local authority has a one-third stake, provides a good service.

But internally, officials said confidentially they have "serious concerns about the long-term viability of the current financial model" after Mears Scotland lost £10m over four years.

The paper suggests scrapping millions of pounds of long-term savings that Mears Scotland was to offer the council on its repairs budget starting next year.

It was first put to councillors on the powerful policy and resource committee the day before September's independence referendum. Press and public were excluded from the meeting.

Officials insisted this change - as yet still unapproved - was legal.

Mr Morgan stressed councillors had not been told exactly how much contract changes would cost. The leaked paper, he said, was "vague". In one letter to council chief executive Gavin Whitefield, he asked: "If the contract is no longer viable, why is the contract not terminated and re-tendered?"

The Labour Group in November voted by 16-14 to strip Mr Morgan of his post on the audit panel on the basis of allegations that he had been rude to four councillors at a group meeting. Those four, including Mr McCabe, were among those who voted against Mr Morgan.

A spokesman for North Lanarkshire Council said: "We have had negotiations with our service providers following a full report to the Policy and Resources Committee in September 2014, with an update to the December committee.

"This will be subject to a further full report to the Policy and Resources Committee for a final decision which will continue to secure best value for the council."

David Miles, the chief executive of Mears which owns two-thirds of Mears Scotland, said: "Anyone who chooses to look at our record of service delivery and investment into North Lanarkshire can see that Mears has complete confidence in the future of this contract."