But it conceded that a lack of infrastructure had been a problem with its flagship Barking Reach project, a separate development of 11,000 homes. "We will see that more infrastructure investment is going to be required over time," said the ODPM.

Because of those pressures, an offer such as Thamesgate's to pay for and build the schools, hospitals, link roads, crossings, train station upgrades, utility supplies and sub-surface power lines may prove tempting.

"We don't need any form of government funding. We can privately fund it from the rollback of the green belt," said Alistair Watson, managing director of Thamesgate.

Thamesgate's Spurchase options would enable them to buy the land at the going price for agricultural land, about Pounds 2,500 an acre. Once planning permission was secured, the vastly increased value of the land - up to Pounds 1.25m an acre - would enable Thamesgate to invest hundreds of millions in infrastructure, and provide a return for landowners and consortium members.

The Campaign to Protect Rural England believes there has been a surge of speculative sales of green belt land since Mr Prescott's housing growth strategy took shape in his Sustainable Communities Plan at the beginning of 2003.

The 50-year-old green belt comprises 1.7m hectares in England, or 13 per cent of the land area, including 600,000 hectares in London and the south-east. But the CPRE said the demand for more housing was leading to green belt areas being reviewed in the east and the south-east.

"There is a great fear that we are seeing a weakening of the green belt policy and a loss of important green belt land in an unco-ordinated way in order to accommodate growth aspirations," said Neil Sinden of the CPRE.

Mr Slaughter said the Thamesgate proposal threw down a gauntlet to the government. But it is not the threat to the green belt that might halt the development. ODPM officials are protective of their Thames Gateway sustainability policy.