ONE of the biggest projects in York and North Yorkshire's history is today in disarray after the Government dramatically pulled its £65 million funding.

The proposed £1.4 billion waste incinerator at Allerton Park between York and Knaresborough was to take the city and county's waste for 25 years, but the Department for Food and Rural Affairs (Defra) said yesterday it was no longer needed.

Council leaders said the announcement would cost taxpayers £6.5 million and called the U-turn shambolic, baffling and disappointing, although opponents of the plan welcomed the news.

Developers AmeyCespa were granted planning permission last year and the scheme was approved by North Yorkshire County Council, City of York Council, and the Department of Communities and Local Government.

Its supporters said it would deal with 320,000 tonnes of waste each year and save £320 million in the long term.

However Defra yesterday (THURS) said it was withdrawing £65 million in Private Finance Initiative (PFI) funding originally allocated to the scheme, because EU waste reduction levels had now been met, meaning the project was no longer needed. Two other schemes, for Bradford and Calderdale and Merseyside, also had funding pulled.

Coun Alexander said: "I'm not happy with the situation; it's shambolic. This is a very poor decision by Government ministers."

He said the county and city had spent millions on the project and said: "We will now have to spend more on landfill taxes and on finding an alternative solution for our waste, which could mean further cuts to the council's budget."

County council leader John Weighell said there had been repeated assurances about the funding and said: To be informed now, after the granting of planning consent and the decision of the Government not to call in the planning application for a public inquiry, that the funding commitment is being withdrawn is frankly baffling and disappointing."

He said the decision had been made without Defra even consulting the councils.

A Defra spokeswoman it would be up to local authorities to decide whether to continue without PFI funding.

Coun Alexander said he would lobby the Government on the decision, which he said had cost York and North Yorkshire taxpayers £6.5m, and suggested on twitter that the council may consider legal action if the development does not go ahead.

Heather McKenzie, branch secretary of the Unison trade union in York, called the announcement a huge blow and said it would have a massive impact on members and front line services, as alternative cuts would be made.

She said: "It makes no sense to attack forms of regional investment in this way. Having less money around will not help to stimulate the economy in the way the Government claims it will - everybody will suffer."

However Harrogate and Knaresborough MP Andrew Jones said: "It is early days yet but this announcement will be welcomed across Harrogate and Knaresborough, Boroughbridge and the surrounding villages by the many thousands of people who objected to this proposal and the many communities who spearheaded the campaign opposing the incinerator."

He said more money needed to be invested in recycling and generating less waste in the first place. More than 10,000 people had signed a petition opposing the incinerator plan.

York Green councillor Dave Taylor added: "The Greens were the only party who opposed this in the council, and we are pleased and delighted at this news."

Bob Schofield, of the North Yorkshire Waste Action Group (NYWAG), which has opposed the incinerator, said it was always premature of the county council to presume it would receive PFI funding.

He said: " It is clear the Treasury considers it is not financially viable and we are delighted they share our views.

"It is now time for the county council to reconsider this whole scheme and bring forward proposals, which we have advocated all along, for a much more environmentally-friendly scheme which is much more cost-effective than an incinerator."