QUASHED, rejected and overturned. The Forest of Dean's single largest planning application for 750 homes at Lydney East has been comprehensively refused by planning inspectors, backed in full by the Secretary of State.

Despite the findings, developers Robert Hitch­ins Ltd have vowed to continue with their next appeal, to be heard at a second inquiry starting in the middle of next month (November 18).

The first inquiry, led by Inspector Susan Holland, concluded that:

•The planning proposal fails to meet the needs for affordable housing. The developers argued that 13 per cent affordable housing was the only way forward in the current economic 'crunch' with a collapse in rental and property prices. The Forest of Dean District Council stuck by government guidelines that negotiations should start at 40 per cent to meet the needs of a mixed community.

• Contributions from the developers failed to meet the needs for primary and secondary education and improvements to Lydney library, Naas Lane Youth Centre, the children's centre at Severnbanks Primary School, highways, drainage in a flood risk area, and providing public open spaces, including sports pitches.

The 25 hectare site in Lydney is the single largest proposed development in the Forest. If it goes ahead, it is projected to bring 1,800 people into the town, adding to pressures on services like buses, trains, schools, drainage and health.

Included in the council's requirements were agreed levels of affordable housing, plans to prevent flooding, at least £1m towards a primary school and 0.8 hectares of play areas and 2.6 hectares of pitches and sports facilities, including changing rooms.

The developers, Robert Hitchins of Cheltenham, claimed the requirement for affordable housing was: "No more than a starting point in negotiations" and "cannot be regarded as anything else but an historic claim."

They argued that, in the current economic downturn and with negligible house sales in Lydney: "any level of affordable housing provision over and above 15 per cent is not achievable." Essentially, they argued the profit margins for any potential house builder would be too low.

The inspector disagreed. Core to the case was affordable housing and she concluded: "A figure of 40 per cent affordable housing as a starting point for negotiations is neither unrealistic, nor unreasonable, and is justified."

She also concluded that the recession: "Represented by the credit crunch, even though severe, can be regarded as a temporary and relatively short-term element".

The Secretary of State for Communities and Local Government, John Denham MP, agreed with all the Inspector's findings and dismissed Hitchin's appeal, refusing planning permission. Costs were also awarded against the company.

Objector Gordon Blake, from Lydney, said issues over potential flooding had still not been properly answered and said: "The go-ahead has already been given for 200 houses on the Federal Mogul site, 400 at Lydney Golf Course, 300 at Lydney East and about 50 at Highfield Hill, that's without the 750 in this appeal.

"There's virtually no industry in the town, so the only people coming in will need to commute to Gloucester or Chepstow on roads that are already choc a block. There's no plans for any extra parking in the town and there will be a huge pressure on doctors and health services. It's just not sustainable."

A spokesman for Robert Hitchins said: "We are hoping to sort out technical disagreements with the district council within the next week or so. But there is another inquiry starting on November 18 and we are not going to abandon that.

"If we reach an agreed position with the council, we'll put in a statement at the inquiry which means the inspector may only need to focus on what's not been agreed."