A controversial sch-eme to create a £60m shopping development in the heart of York has been thrown out by the Government.

After months of legal wrangling and a costly nine-week public inquiry, the proposed Coppergate Riverside scheme in York has been rejected.

But, while opponents of the scheme were delighted, council chiefs have condemned the decision as a major setback in their plans to develop a vibrant city centre.

In the wake of last year's inquiry, the official inspector, Tony Bingham, recommended refusal of the plan on a number of grounds, including its proximity to Clifford's Tower.

Following the Government's endorsement of his findings, leading objector Gordon Campbell-Thomas said action group members were ecstatic.

"The Government has recognised the concerns of citizens, and kicked into touch Land Securities' plans to build a shopping mall facing the ancient monument," he said.

"This proves that the City of York Council had it wrong from the start.

"It never really consulted the citizens of York, and has been motivated by an agenda that was not related to the needs of the people."

He said: "Part of the city that we love and care for has been saved for generations to come."

But at the offices of the local authority, which owns the site, yesterday's announcement was met by disappointment.

Director of environment and development Roy Templeman said the council had worked closely with a number of partners, including English Heritage, on the Land Securities' scheme and were very disappointed by the rejection.

"The Coppergate development represented a unique and essential opportunity for the city and would have created in the region of 800 new jobs," he said.

"The number of visitors coming to York for shopping has fallen dramatically in recent years, from 38 per cent in 1999 to only four per cent in 2003, and the contribution that retail makes to the city's economy has also dropped.

"With the rejection of the Coppergate development we will have to look at other ways of strengthening York's competitiveness within the city centre, other regional shopping centres and out-of-town developments."