YORK council chiefs stand to pay out more than £1 million if they pull out from a controversial scheme for a new village on the city's outskirts, the Evening Press can reveal today.

Opponents of the proposed Derwenthorpe development at Osbaldwick claimed today that City of York Council's financial agreement with the Joseph Rowntree Foundation means its planners cannot be impartial when considering the scheme.

Details of the commitment are contained in confidential council documents, which have been seen by the Evening Press, showing that the authority could pay out up to £1.25 million if it "unilaterally withdraws from development of the site". They show that in May 2001, senior councillors agreed to indemnify would-be developers, the JRF, against costs incurred for preliminary work ahead of purchasing the council-owned land and securing planning permission.

The amount was originally capped at £650,000 but increased to £1.25 million in February, 2003, because of costs from environmental assessments and work in creating access to the site through Fifth Avenue.

The agreement binds the council to pay:

full costs on its withdrawal from the scheme

£325,000, or 50 per cent of the costs- whichever is the lower- if development proves impossible for reasons beyond either side's control.

Osbaldwick Parish Council, Temple Avenue Residents' Association and Meadlands Residents' Association also claim that the foundation is planning to buy the land shortly before its application is considered - therefore avoiding automatic referral to the Government for a decision on whether to call a public inquiry.

Tom Hughes, of Meadlands Residents' Association, said: "I think we need to query these financial arrangements. What's going on? In my opinion, the council are in bed with the JRF, and I believe they have been compromised."

But Coun Ann Reid, the council's executive member for planning and transport, said its planning committee always adopted an impartial stance. Councillors involved in negotiating with the foundation would not take part in any planning decision.

"The committee only looks at an application on its merits. There are times when the council may have an interest in applications, which is why there is a referral procedure to ensure the public are satisfied that has been the case." She did not know of any plans by the foundation to purchase the land prior to securing planning approval.

Nigel Ingram, the foundation's director of development and property, said he could not comment on the contents of any council document.

"Any reasonable person in the street would not expect the foundation to spend five years working on these proposals without entering into some kind of agreement with City of York Council," he said.

He also dismissed claims that the foundation intended to buy the land before securing planning permission. The foundation submitted its original application for the 540-home development to the council in August 2003, hoping it might be decided by last Christmas

But local residents lodged fierce objections and the scheme hit a series of delays.

There are concerns that £3.2 million of Government funding for 65 badly-needed affordable homes could be lost if the scheme is still bogged down in the planning process by next spring.

Updated: 10:09 Monday, September 20, 2004