COUNCIL chiefs could stand to pay out more than £1m if they pull out of a controversial scheme for a 540-home village.

Opponents of the proposed Derwenthorpe development at Osbaldwick, in York, say the city council's financial agreement with would-be developers, Joseph Rowntree Foundation (JRF), meant its planners could not be impartial when considering the plan.

Details of the commitment are contained in confidential council documents, showing that the authority could pay out up to £1.25m if it "unilaterally withdraws from development of the site".

They show that in May 2001, councillors agreed to indemnify the JRF against costs incurred for preliminary work ahead of buying the council-owned land and securing planning permission.

Tom Hughes, of Meadlands Residents' Association, said: "In my opinion, the council is in bed with JRF, and I believe they have been compromised."

But Councillor 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.

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