English Partnerships’ proposal for a model scheme to fund the provision of infrastructure in the growth areas has become the latest victim of the Treasury’s public spending embargo.

The Treasury is refusing to give the green light to EP’s proposal to pay for £17m of the £24m cost of Bedford’s western bypass, part of the Milton Keynes growth area, upfront. The proposal could be a model for kick-starting infrastructure projects across the growth areas.

EP says it will recoup the money from the profits on the development of two housing sites west of the city centre, which Bedford council says cannot be developed until the bypass has been provided.

But the Treasury is worried that if EP pay the money upfront, it will cause short-term pressure on already stretched public finances.

Business leaders from Milton Keynes met communities secretary David Miliband last week to promote the town’s “roof tax”, a funding package to pay for infrastructure that is also being delayed by the Treasury. The council leader Isobel Wilson said Miliband did not indicate whether the government would approve the scheme.