Cleveland chief constable Sean Price ordered the inquiry

The chief constable of the Cleveland force, Sean Price, ordered the inquiry into the circumstances surrounding the murder of Lee King in Middlesbrough in January 2000.

Claims about the loan to known criminal Keith McQuade emerged during legal argument in the collapsed trial of a gang of alleged drug dealers at Teesside Crown Court in September.

At the same court, McQuade had been cleared of murdering Mr King but was jailed for life for a separate offence of possession of a firearm with intent.

A statement from the force on Wednesday said: "Deputy chief constable Ron Hogg, who has full autonomy in the conduct of the inquiry and the choice of his inquiry team, has already selected a number of officers to work under him.

The people of Cleveland have my word that there will be a thorough and fair investigation into the allegations made against police officers Ron Hogg, deputy chief constable, Cleveland Police

"Two external advisors have also been appointed. One is a senior serving officer from an outside force; the other is a former senior officer, also from an outside force.

"Mr Hogg said he was aware of public concerns in the case and was determined that people would be able to have full confidence in the actions of Cleveland Police."

Mr Hogg added: "This inquiry will look in detail into the matters surrounding the police use of informants in this case and the actions of Cleveland officers on becoming aware of the information concerning Keith Joseph McQuade's alleged attempt to procure firearms.

"There is a need for openness and transparency and that will be our guiding light throughout this investigation.

"The people of Cleveland have my word that there will be a thorough and fair investigation into the allegations made against police officers.

Apparent authorisation

"I will be reporting back to the Police Authority on a regular basis as to the progress of the inquiry but the full report will take around three months."

Mr Hogg also said a decision by the Crown Prosecution Service (CPS) is expected on Friday as to whether they will appeal against the staying of the court case.

Should that appeal go ahead and be successful, the investigation would have to be put on hold because the case would then be subjudice.

On Monday, Cleveland Police Authority chairman Councillor Ken Walker called for an investigation into the apparent authorisation for the loan and how any subsequent surveillance of McQuade was handled.

Officers had planned to keep McQuade under armed surveillance after the loan was given, but had lost him within days.

A month later McQuade was arrested and charged with murder following the shooting of Mr King on the Park End estate in Middlesbrough. He was later acquitted.

It has since emerged that at the time of the trial, the jury was not told McQuade had tried to buy guns weeks before the shooting.