AN MP has formally asked the Audit Commission to probe the deal which paved the way for York's controversial Derwenthorpe scheme.

John Greenway wants an investigation into City of York Council's decision to sell land near Osbaldwick to the Joseph Rowntree Foundation, where the foundation wants to build a 540-home model village.

The Ryedale MP has raised concerns with commission chief executive Steve Bundred about the council's decision not to open the sale up to competitive tender.

He said it was alleged that the decision would inevitably mean the local authority receiving less money than it could have done, with minutes revealing that the projected capital returns could be up to £4.5 million less than would have been realised through a private development.

The council had also reserved some £1.25 million for compensation payments to the JRF, should the development fail to go ahead.

He said the authority was minded to approve the JRF's application, in the face of "massive opposition" from local residents, including Osbaldwick Parish Council, but he was backing calls for it to be called in for a public inquiry.

"I have until now resisted the request to ask you to investigate this matter in the hope that CYC would reach an agreement with local residents about a number of aspects relating to the application," he said, adding that the main concern was over access.

"Sadly, such agreement has not been reached and, understandably, my constituents wish to explore every avenue open to them for this matter to be re-considered.

"I recognise that these are serious allegations, but I believe they are worthy of investigation, and I would request that the Commission undertakes such an inquiry," he said.

A council spokesman said the foundation was a valued "developer partner" with the local authority, with local and national standing, and it was also able to contribute from its own resources to add value to the project.

"It has always been the intention that by working with one main registered social landlord, we would achieve the aspirations for a cohesive and sustainable community, rather than seeking to develop the land in a piecemeal fashion as has been done in other parts of the city," he said.

He said external consultants had comprehensively evaluated the land value.

"This was used as the basis for the financial elements of the partnership agreement.

"It has also been established policy and practice in City of York Council for many years to use the council's land assets to facilitate the development of affordable housing subject to the Secretary of State's approval."

Updated: 10:15 Friday, March 18, 2005