The city council's cabinet agreed at a special cabinet meeting last Wednesday that it would back Co-operative Estates' 15,000-home plan near Great Glen and Stoughton subject to conditions.

The decision has angered campaigners.

Dr Kevin Feltham, chairman of the Campaign Against the Stoughton Co-op Eco-Town, described the decision as a 'scandal' and added: "This outrageous city decision will affect thousands of people living in the south-east wards of Leicester city who could see their property values move into negative equity, jobs sucked out to Pennbury and the A6 entrance into Leicester along London Road be devastated by the extra road width needed for the buses and trams."

County and district councillor Simon Galton said he was 'astonished' and 'outraged' at the city's actions.

"I can't quite bring myself to believe that they could undermine the collective actions of local councils like this. A process was agreed to develop a strategic assessment that is due to report on December 12. The city council supported this and even contributed £20,000 of taxpayers' money.

"I just don't understand how the city cabinet could undermine an independent process like this – especially when Pennbury has little to do with the city authority."

The Government shortlisted the 'Pennbury' site as one of its 15 possible eco-towns in April. That shortlist has now been reduced to 12 after three bidders dropped out. Co-op owns the majority of the land while another little-known agency called English Partnerships owns a small section.

The city council said it would support Co-op's plan if:

1 'Affordable' housing is at least 30 per cent of the scheme

2 It would grow as a 'sister town' to the city

3 Plans for jobs are co-ordinated with work going on in the city

4 A tram system is installed

5 The city council is involved in the planning arrangements

City councillor Patrick Kitterick said after last week's meeting: "After considering all of the information we have had so far we believe that the Pennbury site has potential as an eco-town.

"There are still many more discussions we need to have but we think that the council will be able to back this proposal if the final scheme is one which meets all of our requirements and stands to benefit the city and the people of Leicester.

Graham Ramsbottom, head of land development and ventures for the Co-op, said: "We are confident our proposals can be a catalyst for the transformation of the city region."