A GOVERNMENT planning inspector dropped a bombshell last week when he relegated the highly controversial town council-owned Pennsfield site to the back burner in his report following the local plan inquiry. The long-awaited inspector's report was made public on Monday night after the six-month public inquiry into East Hampshire District Council's local plan, which finally ended last autumn. It was a mammoth exercise during which inspector Richard Hollox examined around 7,000 objections, more than 920 of which involved appearances at the inquiry. The removal of the contentious Pennsfield site from EHDC's "baseline" list for immediate development, to a reserve list which will only come forward if more housing land has to be found, is only one of the surprises to hit the district council's policy planners this week. The inspector, who stressed that he believed development on the edge of Petersfield would intrude into the Area of Outstanding Natural Beauty, recommended several new sites for immediate development to make up for the "baseline" sites he wanted to see put back to the reserves. They included a new site for 12 homes at Station Road and North Street in Petersfield, and, in a blow to Bramshott and Liphook's hopes to attract employment to the village, he has also recommended that the former King George's Hospital site close to the A3 should be earmarked for 150 houses. Mr Hollox said he was not convinced that keeping it for employment was any longer justified. He said the beauty of East Hampshire was one of its characteristics and assets, along with the attractive setting of its towns, and they deserved as much protection as possible for as long as possible. And stressing this, he recommended sites on the edge of Petersfield as "reserve" sites and bottom of the reserve priority list. Along with the Pennsfield land which he recommended should go to the reserve list, he added a new site earmarked for 100 homes on the south east of the Causeway in Petersfield, next to the existing mobile home park. He also earmarked another new site on land south of Larcombe Road in the town for another 100 houses - it was, he said, located more within the built-up area. The Causeway Farm site earmarked for a further 275 houses remains at the bottom of the reserve list, ranked 11 out of 12. But it is the Pennsfield site which is likely to draw the most comment from councillors in Petersfield. There was huge controversy and a bitter political battle five years ago when the then mayor of Petersfield, John Crowhurst, pushed for the sale of the 10- acre greenfield site behind Heathfield Road to housing developers. And there was outrage when the land was included in the local plan and earmarked for 90 new homes. Town councillors knew that if the site remained as a "baseline" site in East Hampshire District Council's local plan it could net the town council an estimated £8m if it was sold for housing. It was the biggest-ever deal in the 26-year history of the town council when councillors finally signed and sealed an agreement with Kebbell Homes in February 2001. The developers are believed to have gambled around £250,000 for the option to build on the land if it came forward in the local plan. And councillors could have expected several million pounds more when planning permission was granted. At the time the then mayor Chris Jenner described the deal as "a lottery win for the town", saying it would bring many benefits for residents. It was thought the money would help the town council pay for a number of improvements throughout the town, including extensive work to the Festival Hall, introduction of CCTV cameras and new sports facilities. But Alan Harper, who represented residents living in the Heathfield and Barnfield area, raised objections to the way the deal was handled by Petersfield Town Council, and town councillors Brian Keefe, who later lost his seat, and Brian Dutton, currently mayor of the town, also raised concerns about the manner in which the option agreement had been discussed. This week, after the inspector's report was published, former mayor Mr Jenner told The Herald: "I'm bitterly disappointed - this could have benefited the town enormously. But it could be a blessing in disguise. With that amount of money everyone wants their bit of the cake." Referring to several projects which have been connected to the possible windfall from Pennsfield, Mr Jenner added: "Some people in the town council had already spent the money in their heads." He said he disagreed with the inspector over his reasons for relegating Pennsfield to the back burner. Rather than intruding into the countryside as Mr Hollox contended, Mr Jenner claimed: "This was just rounding off a corner and filling in a bit which had not yet been developed. The inspectorate is rather like God, it seems to move in mysterious ways. " Mr Dutton would not comment, saying he had not yet seen a full copy of the report. Mr Harper has been campaigning against development at the site since 1975. He said: "I cannot understand why, when most of the Meon Valley is under threat from flooding, this area could be considered for development at all. "It is very much a relief. I'm really chuffed because I've been fighting it for years. "Together we managed to delay any action by many years." Former town councillor Brian Keefe, an outspoken critic of the decision to sell Pennsfield, said this week: "I spoke out against the plans for selling the land originally. It was seen as a pot of gold and described as a lottery win for the council. I'm very pleased with the decision. They had a very long list of wonderful things they wanted to do with the money, and this news will certainly be a setback for them. Eventually, things have a way of coming round and finding people out." The Causeway Farm Group has welcomed the inspector's report, which members claimed had underlined their own aims to reduce development in Petersfield and protect the AONB. Spokesman Philip Haines told The Herald: "This endorses our argument that the AONB should be projected and the Causeway Farm should not be developed. We are confident that the upcoming designation of the South Downs National Park will help ensure that the inspector's hope that none of the Petersfield reserve sites will ever be developed, is realised." He added: "At the local inquiry the Causeway Farm group argued that housing development in Petersfield was largely not needed as new houses would primarily be occupied by workers who are employed outside of East Hampshire, and the proposed violation of the AONB was unwarranted." District councillor Bob Ayer told The Herald: "I am really pleased that the inspector has attached such importance to the AONB in the context of significant development, especially on the edge of the town."