A sleaze inquiry into the sacking of Birmingham City Council cabinet member Talib Hussain is under way.

Labour claims Coun Hussain (Lib Dem Sparkbrook) was forced from office because he refused to approve a cash grant to the Bangladeshi Welfare Association, whose chairman is a Liberal Democrat councillor.

Coun Hussain lost his £40,000-a-year job running local services and community safety after colleagues passed a resolution expressing no confidence in his performance.

He was accused of bringing the Liberal Democrat party into disrepute by axing the BWA's annual £6,000 grant during the Aston by-election campaign in June. Labour group leader Sir Albert Bore has asked the Standards Board for England to investigate the "questionable practices" of the Lib Dems group.

He said Coun Hussain had acted in accordance with a report by council officers which stated that the BWA had met only 48 per cent of its productivity targets and was failing to provide a satisfactory service.

Sir Albert (Ladywood) added: "If the Lib Dems are going to instruct officers of this council to make taxpayers' money available to organisations because of the electoral impact of these decisions, then these actions are a matter for the Standards Board."

Coun Hussain believes he is the victim of anti-Asian prejudices in the Liberal Democrat party.

He said: "The reason for sacking me is my colour. I feel I have been sacked because I am an Asian."

Coun Hussain, who has now resigned from the Lib Dems, said three group members had already signalled their intention to stand for election to the cabinet in his place. All are white and include former Lord Mayor Jim Whorwood.

Coun Hussain's cabinet membership came to an end at a Lib Dem group meeting last Friday where he was presented with a written report listing 36 allegations about his behaviour. The dossier accused Coun Hussain of factionalism - recruiting his friends as party members to strengthen his own position.

He was also accused of hampering the Conservative half of the Tory-Lib Dem coalition running Birmingham by refusing to sanction a £30,000 grant to set up a Citizens' Advice Bureau in Sutton Coldfield.

Coun Hussain undermined the arrangement with the Tories and should be "removed as cabinet member for local services as his decisionmaking is not equitable", according to the dossier.

The report also accuses him of a "total unwillingness" to respond to issues raised by colleagues. Coun Hussain denies all the allegations. He said: "The meeting was a witch-hunt."