Image caption Unite General Secretary Len McCluskey always maintained the union had done nothing wrong

Labour has cleared Unite of trying to rig the selection of a party candidate in Falkirk - claims that led to a major row between the union and Ed Miliband.

The party has decided no organisation or individual broke its rules after evidence of wrongdoing was withdrawn.

Two union officials at the centre of the row have been reinstated.

Mr Miliband proposed wide-ranging changes to Labour's links with the unions in the wake of the row, due to be debated at next week's TUC Congress.

BBC's political correspondent Ross Hawkins said the Labour leader believed something had gone badly wrong in Falkirk and Friday's development would prompt questions as to why the party acted so quickly and dramatically to reshape their union links.

'Dithering'

Media playback is unsupported on your device Media caption Eric Joyce MP says: "victory for the leadership of Unite"

Falkirk MP Eric Joyce - who resigned from Labour after being convicted of assault at a Commons bar - said questions remained.

Tom Watson, the Labour MP who stood down from the shadow cabinet after the row about candidate selection in Falkirk, said the party leadership made "rash decisions" about the affair.

Analysis The process of selecting a Labour candidate in Falkirk provoked the bitterest row between the party and the trade unions in a generation. This was no local difficulty. It had national and wide-ranging personal and political implications. Members of the Unite union were accused of using underhand means to try secure the nomination of their favoured candidate, Karie Murphy. She was close to the union's general secretary Len McCluskey, and worked for Tom Watson, the party's general election co-ordinator. He resigned from the shadow cabinet over the leadership's handling of the Falkirk allegations. In the wake of the row Ed Miliband announced sweeping reforms to his party's links with the unions - changes which are said to have cost Labour £1m in affiliation fees so far. Tom Watson now says it was rash of Labour to rush in to wide-ranging trade union reforms before the events in Falkirk had been properly investigated. Karie Murphy is said to feel battered and bruised tonight - the reputations of some of those involved in this episode might yet suffer a similar fate.

People would be "raising eyebrows" when they saw Labour had launched a "complete reassessment" of its relations with the unions on the basis of an inaccurate report, he said.

"I think the most charitable thing I can say about that is I don't think the party leadership were in full possession of the facts when they took the decisions they did.

"Had they known the facts I'm sure they wouldn't have made such rash decisions."

Mr Joyce said: "I think there are many questions left to be answered although it's certainly a tactical victory, without question [a] political victory for the leadership of Unite."

The Conservatives suggested the latest development showed the unions were "calling the shots" for Labour.

"Ed Miliband must now stop dithering, come clean and publish Labour's report into the Falkirk selection in full," said Tory party chairman Grant Shapps.

Labour has been investigating allegations that the Unite union - its biggest financial backer - tried to sign up members without their knowledge in the constituency to ensure their favoured candidate, Karie Murphy, was selected.

Announcing the findings of the inquiry, the party said: "Since Labour began its internal process key evidence has been withdrawn and further evidence provided by individuals concerned.

"No organisation or individual has been found to have breached the rules as they stood at the time."

'Ordinary values'

The party said that neither Ms Murphy nor Stevie Deans, a fellow Unite member who was chair of the local Labour Party, had been found guilty of any wrongdoing and both had been reinstated.

Labour defended the investigation saying it had "acted quickly to protect the interests of the party".

Despite her reinstatement, Ms Murphy has decided to withdraw from the contest to be Labour's candidate in Falkirk. She said she had done so in the interests of "reconciliation and unity".

Image caption Karie Murphy was the union's preferred candidate

In a statement, she said she had been "shocked and saddened" by what had happened.

"Throughout the controversy surrounding what we consider to be the revitalisation work in Falkirk both Stevie Deans and myself have maintained that we have done nothing wrong, and that our union Unite has done nothing wrong," she said.

"The media attention on Falkirk has centred on candidate selection and, whilst having MPs who represent the values of ordinary working people is very important, our objective of getting ordinary members actively involved in a vibrant local party has been forgotten in media coverage."

Labour's ruling National Executive Committee will draw up a list of potential candidates from which local party members will choose a prospective MP to represent the party in the 2015 election.

Police were asked to investigate the matter but decided they were "insufficient grounds" to justify further inquiries.

The Falkirk row prompted Mr Miliband to call for an overhaul of the process by which union members affiliate to Labour - a move which would have cost the party millions in funding but which he says could revitalise the party and boost membership.

The GMB union announced earlier this week that it would cut affiliation fees to Labour by nearly £1m.