THE deputy leader of Lancashire County Council and another county councillor have been released on police bail after being questioned by police investigating alleged discrepancies in Labour party funding.

But Coun Frank McKenna -- a prominent North West politician who now also faces a Labour Party investigation -- claimed he was being victimised by other members of his party.

Welfare rights chairman Coun McKenna, 37, was arrested on suspicion of forgery along with West Lancashire Labour party treasurer Coun John Fillis, as part of an investigation codenamed Operation Icarus. Coun McKenna and Coun Fillis, who represent their respective home districts of Skelmersdale and Ormskirk, were arrested at their homes in Upholland and Ormskirk. Both were questioned at Colne police station before being released on bail until September 11.

The men's solicitor, Paul Schofield, of Farley's Solicitors, in Blackburn, said: "Both clients completely deny the allegations. As far as Mr McKenna is concerned, he firmly believes that the arrests were as a result of a campaign of victimisation by other members of the Labour party."

A Labour Party spokesman said: "We expect high standards of integrity from its elected representatives. Any allegations of failure to maintain these standards will be properly investigated and any appropriate action taken."

A county council spokesman said he could not comment on whether the two men would be allowed to continue as councillors.