The government's decision to abandon the Transport Innovation Fund and the possibility of £500 million for Cambridgeshire had dealt another severe blow to Ely's Southern Bypass.
Tories on East Cambridgeshire District Council hoped that the fund would have financed transport projects for the district bringing money from other sources for the bypass.
But the government has pulled the plug on the project which could have provided extra train services from Ely to Cambridge, a network of cycle routes and a station at Chesterton to ease congestion on the A10 into Ely.
Councillor Nigel Bell, a member of the East Cambridgeshire Traffic Management Area Joint Committee said: "This is yet another nail in the coffin for the Southern Bypass and councillors must, at long last, be allowed to examine more realistic and practical ways to improve the traffic flow at the level crossing.
"The Tories hoped the TIF money would pay for the essential transport projects required by the massive housing growth in and around Cambridge and that this might free up external funding for the Ely bypass.
"Now, with a complete lack of any potential funding for the Southern Bypass scheme, we have to question the whole viability of the Ely Masterplan. A project to bring an extra 4,000+ homes to the city without proper transport improvements is a recipe for crippling congestion."
Councillor Ian Allen, East Cambridgeshire Transport Spokesman said: "The Tories were hoping that the spin off from TIF would be money for the Southern Bypass. This decision is a crushing blow to those hopes.
"How many times does the government have to tell us that the Southern Bypass is a non-starter? Without money for transport improvements, Ely cannot sustain another 5,000 homes. It is time to accept that the Masterplan is a fool's errand."
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