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A controversial housing scheme which was given the green light by a cabinet minister after he was lobbied by a Tory donor was rejected by the Government on Thursday.
Former housing secretary Robert Jenrick went against the advice of planners and granted permission for media mogul Richard Demond's £1billion Westferry Printworks development in east London last year.
The plans were approved just a day before a new levy was imposed by Tower Hamlets council, potentially saving Mr Desmond and his backers an estimated £45million.
A fortnight later, the developer gave £12,000 to the Conservative party.
It sparked a major political row and a High Court challenge from Tower Hamlets council. The decision was later quashed for reasons of “apparent bias”.
The Prime Minister originally stood by Mr Jenrick, but he was sacked in a reshuffle in September and new Housing Secretary Michael Gove given responsibility for reviewing the scheme.
A report published on Thursday, agreed that the development breached a raft of local and national planning policies, including around quality of design and ensuring sufficient affordable housing.
"The Secretary of State considers that overall, the scheme does not reflect local design policies or government guidance on design," the report states.
"This view is further reinforced by his conclusions on heritage issues. He considers that the shortcomings of the proposal...carry significant weight against the proposal."
It concludes the scheme, designed by architect PLP on behalf of Northern & Shell, “would be harmful to the character and appearance of the area” and was of “excessive height, scale and mass”.
More than 1,500 homes were planned for the site on the Isle of Dogs. They had previously been turned down by the council and the planning inspector for being too dense and lacking affordable housing in one of London's poorest boroughs.
Documents later revealed Mr Jenrick had "flagged" the development to staff and stated “there may be some sensitivity in terms of timing” two days after attending a dinner with Mr Desmond.
On the same day Mr Desmond sent a text to the minister stating: “We appreciate the speed as we don’t want to give Marxists loads of doe [sic] for nothing!”
It was suggested by the Labour-run Tower Hamlets council that this was a reference to the levy it was set to impose on large developments, which would have cost Mr Desmond an additional £45million.
Councillors suggested the minister was acting to save the developer money.
Mr Jenrick has always strongly denied the claim.
Mayor of Tower Hamlets John Biggs said: “When Mr Jenrick approved the Westferry Printworks planning application, going against the views of Tower Hamlets council, many residents, and his own planning inspector, it raised serious questions.
“There were allegations he ignored forceful reasons for refusal and rushed through the decision to save the developer money and deprive local services of millions of pounds in the process.
“I’m pleased that now, after many months and two public inquiries, both the inspector and the new Secretary of State share the council’s view that the larger scheme should be refused permission.”
Following the refusal Northern & Shell, the media and property company owned by Mr Desmond, could build the 722-home development it has planning permission for or draw up a new scheme.