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New city the size of Leeds planned by Livingstone in east London

The proposals, backed by the leading architect Richard Rogers, undermine Mr Prescott's long-held ambition for massive housing growth in the Thames Gateway area of Kent and Essex.

The project, dubbed City East, would see 700,000 people housed in areas such as Greenwich, Canary Wharf and Stratford over the next 25 years.

But Mr Livingstone's desire to focus growth in the most developed areas of the Thames Gateway calls into further doubt the Government's plan for housing across the whole Gateway, an area that represents the largest regeneration zone in Western Europe.

Lord Rogers, chief architectural adviser to the Mayor, told Building Design magazine this week that Mr Livingstone had commissioned a six-month study into City East after agreeing that development of the Gateway must concentrate on parts of London with existing transport hubs and jobs.

The move follows a meeting on Tuesday of the London Development Agency's international design committee, a panel that also includes the architects Norman Foster and Will Alsop.

"This area is the western half of the Thames Gateway and the main reason for [focusing on] this is that the public transport is there," Lord Rogers said. "Where there is infrastructure, you can build a piece of the city like Islington or Notting Hill Gate in terms of density. The river is a glorious public space in this area, but so far we have done a bloody terrible job [of utilising it]."

Asked what the City East proposal would mean for the wider Thames Gateway, he added: "You cannot do everything at the same time and, in a way, we have to wait [to develop further east] otherwise it is not sustainable."

The Mayor, who has the power to reject any planning application, has grave doubts about the future of large-scale housing schemes further east, including the flagship 11,000-home Barking Riverside development.

A spokesman for the Office of the Deputy Prime Minister said there had been discussions on City East but that, at present, government policy remained unchanged.