A £500m regeneration project, which could create 2,500 jobs, took a major step forward last night after the Government endorsed the scheme.

Plans for the joint project involving Tees Valley Regeneration and Hartlepool port operator PD Ports were approved by Hartlepool Borough Council in December, but were then called in by the Government Office for the North-East.

Now, the office has decided that the development is in keeping with national planning policy, and it is set to go ahead.

The Victoria Harbour development will be built on the site of Hartlepool's 300-acre commercial port, north of Hartlepool Marina.

The port is expected to remain operational with the development occupying two-thirds of the site - presently used as open storage.

The major development will include 3,430 homes, a primary school, public open space, including a coastal walkway, and a pedestrian and cycle bridge.

There will also be 57,000sq metres of office accommodation, 17,000sq metres of retail space, 10,000sq metres for leisure and 10,000sq metres for community use.

A process will begin in the summer to appoint a developer for first phase of the development, to start later in the year.

Victoria Harbour will be funded by public and private investment and will be worth an estimated half billion pounds when complete. Building costs are expected to be far less, with only a fraction of the cost coming from the public purse.

John Holmes, director of regeneration and tourism at One North-East said: "This is great news, as it will allow the progression of Victoria Harbour, which we believe is an excellent scheme that will drive up economic investment and bring tourism benefits to the town and the wider region.

"There is a proven track record in the North-East of major mixed use developments, such as Victoria Harbour, having a major regenerative impact on the wider communities and we look forward to seeing this public-private sector partnership develop over the next few years."