A LOCAL government watchdog has begun an investigation into the controversial Derwenthorpe scheme.

The Audit Commission has confirmed it is looking into the proposed development near Osbaldwick, where the Joseph Rowntree Foundation (JRF) wants to build a 540-home model village - despite fierce objections from some campaigners.

Ryedale MP John Greenway has also formally asked the commission to probe City of York Council's deal to sell the land to the JRF, and not open it up the sale to competitive tender.

The council stands to pay out £1.25 million in compensation to the JRF if the deal falls through.

City of York Council backed the JRF's outline scheme for the Derwenthorpe development at a meeting in January, but then had to refer it to the Office of the Deputy Prime Minister, John Prescott, because it involved council-owned land. Ministers could order a public inquiry into the scheme.

Mark Kirkham, district auditor for City of York Council, told the Evening Press: "We are looking into following up issues that have been raised with us by local electors." He said the inquiry had been started, and he did not yet know when it would finish.

Bill Hall, chairman of Osbaldwick Parish Council - which has called for a public inquiry into the scheme - said the complaints to the Audit Commission which prompted the investigation had not been made by the parish council.

But he said: "I'm pleased they're investigating. If it results in a public inquiry I'd be pleased - but that's just my personal view."

Mr Greenway said: "I'm glad the Audit Commission has taken the complaint seriously.

"I would hope that the fact they are looking at this will persuade John Prescott's office that there are very far reaching implications on this - and that a full public inquiry is necessary."

Council leader Steve Galloway said he had not been told that an investigation was taking place.

He said: "It's perfectly reasonable for any council tax payer to raise any issue with the district auditor. I'd be surprised if it was an investigation as opposed to an informal inquiry."

Updated: 08:49 Monday, April 04, 2005