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An eleventh hour decision to pull the Lower Thames Crossing bid was made after the government told highways bosses it would be refused, it has emerged.
Highways England withdrew its planning application for the £6.8bn road link between Kent and Essex late on Friday.
A decision on whether to accept it for review had been expected by the government's planning arm the same day but instead it was withdrawn at the last minute.
The company said it had decided to shelve the application to address "specific points" raised by the Planning Inspectorate before resubmitting early next year.
An update on the process from the Inspectorate revealed it had "contacted Highways England to establish that the Inspectorate would be progressing to issue a decision to not accept the application and identified the main issues that had arisen".
Highways England spokesman Harry Bellew said it was "awaiting detailed formal guidance from the Planning Inspectorate" .
"We’ve withdrawn the Development Consent Order application for the Lower Thames Crossing based on early feedback we’ve had from the Planning Inspectorate," Highways England said.
"We will take time to collate the information required for the specific points raised and will be resubmitting the application early in the new year."
The Lower Thames Crossing has been dubbed Britain’s most ambitious roads project in a generation and would see 16-metre wide tunnels bored under the river between Gravesend and Medway.
It's been touted as a potential solution to the congestion problems at the existing Dartford Crossing and bosses say it will unlock billions of additional economic benefits, double the road capacity and create thousands of jobs.
A planning bid was submitted last month after four years of consultation and nearly 900,000 responses – believed to be one of the largest ever.
But cracks surfaced in the road project earlier this month after Highways England bosses hit a snag with the Inspectorate, which has the final say over the Development Consent Order (DCO) it needs to start work.
A series of meetings were held between the two as the Inspectorate attempted to glean more detail and clarification on the bid, according to minutes published online.
In particular, it requested "unredacted information" from the consultation report be provided alongside the responses.
It wanted to match the information with the responses received from the public.
Highways England provided this on November 11 but just two days later the Inspectorate contacted the government-owned company to say it would be rejecting the application.
Problems with the planning bid were then identified to Highways England, which was given the opportunity to "signpost where in the submitted application documents information relevant to the main issues were set out".
Despite providing this last Tuesday, the Inspectorate again told highways bosses it was insufficient, leading to the road authority pulling the application three days later.
Meanwhile Gravesham council, which opposes the plans, says the decision had come as a "great shock".
Labour council leader John Burden said he met with highway bosses who were still "gung ho" a day before the bid was shelved, and he was not given any indication of the forthcoming u-turn.
"We met with the new director and the team that were leading this on Thursday setting out our concerns," he said.
"We explained we thought the consultation had been very poor and that they had ignored local people. Why couldn't they have told us?"
The authority leader believes important issues such as what happens when there is an incident at the Dartford Crossing had not been given adequate attention.
This, he claimed, could lead to potential gridlock on ill-equipped local roads, particularly Wrotham Road on the A227 and surrounding villages such as Istead Rise and Higham.
"They even admitted it was not their problem," he claimed, adding when he raised these concerns he was told it would be a matter for Kent County Council to resolve once the project was finished.
"Why couldn't they have told us?"
Cllr Burden said residents would also be left facing a host of issues including noise generated from eight lanes of traffic 800ft from people's doorsteps.
He stressed the council would be pressing for adequate mitigation on these aspects should the scheme go ahead.
"We accept there needs to be a crossing but I don't agree it needs to be here," he added.
"But if it is going to be there, our job is to ensure the local residents are listened to."
"We are going to stand by our local people and we will fight for a better deal."
In the meantime, Cllr Burden urged groups such as the Campaign to Protect Rural England (CPRE) to come together to share "gems or a nugget of an idea" to help devise better solutions.
On this aspect, he pointed towards the government's net zero carbon target and said plans for automated and electric cars prompted an urgent rethink on the long-term viability of the crossing.
Alex Hills, Gravesham chairman of the CPRE Kent, said: "We would be happier if the application was completely withdrawn as it is an ill-thought out scheme that will be massively damaging for Kent without solving the problems at the Dartford Crossing."
But Dartford council leader Jeremy Kite, whose residents are frequently plagued by a host of traffic problems near the existing tunnel, said he was disappointed to see plans temporarily shelved.
The Tory leader reiterated the project's size and complexity and said it showed the process works, and that local people's voices were being heard.
"This proves the system is working," he said. "It is very important that if someone has raised concerns, whether it is an individual, group or otherwise that the application addresses it."
Cllr Kite added he was confident the project would still go ahead and that the build start date afforded flexibility in this regard.
Cllr Andy Stamp, Medway Labour Group's spokesman for regeneration and communities, said Medway could be "heading for gridlock" if issues were left unresolved.
The Gillingham North councillor said: "This latest delay will be disappointing news for long-suffering motorists, particularly those businesses and workers who have no other option than to use the Dartford Crossing on a frequent basis.
"However, this is a huge infrastructure project. It is vital that Highways England carries out a full and thorough consultation process with all communities affected, and considers additional measures to reduce the environmental impact of the proposed crossing.
"Here in Medway, we must ensure that Highways England fully considers the impact the Lower Thames Crossing will have on traffic volumes and congestion along key routes around the Towns.
"Extra road capacity at junction 3 of the M2 where it meets the A229 Blue Bell Hill must be provided before the Lower Thames Crossing opens, otherwise Medway will be heading for gridlock."
For the scheme to progress it requires the consent of the Planning Inspectorate before being put before the government transport minister for a final decision.
A meeting is now due to take place between the road authority and the government's planning arm where it will "give advice in respect of the issues that were identified in the withdrawn application documents and other relevant information".
Highways England said it did not have any further comment to make on the "specific points" raised by the Planning Inspectorate but is working to understand and respond to the feedback once received.
It comes just a week after bidding opened for contractors to build the new tunnel, which at £2 billion is said to be one of the largest contracts ever put out for tender.
Ground investigative work has already begun for the road project which if built, is estimated to take 74,000 drivers per day in its first year – amounting to 27 million in total.