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Plans to build 1,300 homes and a secondary school near the Millennium Dome on Greenwich Peninsula have fallen through after the Homes and Communities Agency had its regeneration budget cut.

The HCA, Greenwich council, Southern Gas and the Health and Safety Executive (HSE) have been locked in a two-year struggle over the project, which was to be sited next to a gasometer.

Hopes were raised in the summer that the agency would be able to find the 拢12m needed to remove the gasometer, but it has since had its regeneration budget for the Thames Gateway cut by 拢70m.

The HSE has blocked the development because it is within 150m of the gasometer. The rules about exclusion zones around hazardous sites were tightened in the wake of the 2005 Buncefield oil depot explosion in Hertfordshire.

In particular, the decision means more delay for the 1,150 pupils of John Roan school and VT Education & Skills, the contractor charged with building the school. They are to be moved from their present home in Blackheath to a site a third of the size on the peninsula.

I鈥檓 unconvinced by the HSE鈥檚 argument in the absence of any credible recent evidence

Nick Raynsford MP

Nick Raynsford, the MP for Greenwich, who has campaigned for the scheme, said: 鈥淭he exclusion zone has blighted regeneration in the peninsula and this is not the only area in the country that is affected. I鈥檓 unconvinced by the HSE鈥檚 arguments in the absence of any credible recent evidence of danger.鈥�

The client for the development is Greenwich Peninsula Regeneration Peninsula Quays, a 50:50 joint venture holding company formed by Quintain and Lend Lease.

Phillip Dibsdale, Head of Area for the South East, regarding the John Roan School said: 鈥淭he HCA is working closely with Southern Gas Networks and Greenwich Council to identify options for decommissioning the gasholder.

"A feasibility study of alternative gas storage has been carried out and we are now looking at the various implications so we can continue the regeneration of Greenwich Peninsula.鈥�