Councillors have been banned from discussing local park-and-ride schemes if they own a car under an ethical watchdog created by John Prescott.

The Deputy Prime Minister is accused today of undermining local democracy and stifling free speech by imposing "draconian" rules on thousands of councillors.

A damning report reveals how local authority members are being barred from speaking or voting on subjects simply because they are perceived to have taken a position on the issue.

Even councillors who have been elected specifically to fight a particular issue have fallen foul of the rules and found themselves told they cannot speak or vote on it.

The controversy centres on the Standards Board for England, which was launched by Mr Prescott in 2001. The Deputy Prime Minister claimed that the new body would help to ensure high ethical standards in local government.

The board handles complaints about councillors' behaviour and is supported by a network of ethical standards officers, who are each paid £61,000 a year. Each authority also has its own monitoring officers who advise councillors on their conduct.

In 2003-04 the board handled more than 3,500 allegations and launched 1,105 investigations. Sanctions were imposed on more than 200 councillors who were judged to have breached the code of conduct.

The report's authors - Owen Paterson, the shadow transport minister, and Gerald Howarth, the shadow defence minister - said they were shocked by the scale of the chaos the Deputy Prime Minister had created.

There is particular concern about the board's belief that councillors should not be allowed to debate a subject if they have already made up their minds on the issue — the crime of "predetermination."

Councillors on South Cambridgeshire district council, for instance, were warned that they should not "pronounce on a park-and-ride scheme if they drove a car", says the report, A Question of Standards.

The report adds that the councillors were also told "they might be disqualified from discussing the siting of a mobile phone mast if they themselves used a mobile phone".

In another example, John Pickersgill, a member of Derwentside council in Co Durham, organised a local referendum on plans to build more wind turbines in his ward. His survey found that four out of five local people opposed the proposals.

However, when he tried to raise his findings in a council meeting on the issue, he was judged to have a "prejudicial interest" and was excluded from the room.

Despite concerns about the system, Sir Anthony Holland, the board's chairman, has defended the rules on pre-determination. "It simply means that decisions shouldn't be made if people are not willing to consider the alternatives, ie they must not have closed minds," he said earlier this year.

However, the Local Government Association, in a recent report, urged ministers "to ensure that councillors are not legally restricted from speaking out for their communities" on issues such as planning.

gwilson@telegraph.co.uk