UPDATE: 1.25pm

CAERPHILLY council's acting deputy chief executive said she will be "leading the organisation until further discussions take place" in the wake of two members of staff having been released on police bail.

Sandra Aspinall said: "I want to send a clear message to the community that it is very much ‘business as usual’ at Caerphilly County Borough Council.

She added: "We will continue to concentrate our efforts on delivering quality services to residents and these recent events will not affect our commitment to this goal."

UPDATE: 8.30am

Two senior Caerphilly Council executives were released on police bail overnight after being arrested on suspicion of fraud and misconduct in a public office.

Police made the arrrests yesterday as part of as part of the investigation into pay rises awarded to top officials at Caerphilly County Borough Council.

The chief executive of the council Anthony O'Sullivan was suspended in March after rises of up to 20 per cent for top officers were found to be "unlawful" by a Wales Audit Office report.

The pay rises prompted hundreds of council staff to walk out in disgust towards the end of last year when they were made public.

A statement issued by Avon & Somerset Police said yesterday: “Following a request to carry out a review by the Wales Audit Office two people have been arrested on suspicion of fraud and misconduct in public office.