Solicitors acting for Dawn Reed and Christopher Lillie have begun proceedings against Newcastle City Council and a four-member team that drew up a report last November called Abuse in Early Years.

The two workers were sacked by the council in February 1994 for gross misconduct after allegations of child abuse began to surface at a council-run nursery in the city.

They were charged with a string of sex offences against young children but were later acquitted at Newcastle Crown Court after the cases against them collapsed.

Their solicitor, Geoffrey Bindman, with London-based Bindman and Partners, said: "We have begun proceedings this afternoon in the High Court in London against Newcastle City Council and against the four authors of the report.

"The claim is for damages for libel and for an injunction to restrain further libels, namely the allegations against Christopher Reed and Dawn Lillie that they are sexual abusers.

"They were charged with offences and they were acquitted."