Blackpool Council faced losing a £1.7m housing grant if it did not agree to pay the relocation fee.

The Housing Corporation cash – to be used to build 26 homes on land at Tarnbrook Drive, Grange Park – will be withdrawn if the scheme does not begin by this March, the policy overview and scrutiny management committee was told.

The committee agreed the council should pay the cost of relocating the mast so the scheme, already delayed from last July, could go ahead.

However, councillors called for further investigations into why the structure had been allowed to be put up in the first place on land earmarked for redevelopment.

Coun Simon Blackburn, chairman of the audit committee, "called in" the decision of Coun Lily Henderson, cabinet member for adult social housing, who gave permission for the council to fund relocation of the mast, for further investigation by councillors.

He said: "Nobody would want to stand in the way of development in an area that clearly needs development. I would ask the committee to consider referring this issue back to the appropriate scrutiny committee to see what has gone wrong while allowing the development to go ahead."

Coun Henderson said: "The people who gave permission for the mast to be put up didn't follow correct procedure.

"Now we are in a position where if we don't move quickly, we won't get the finance we need to make Tarnbook look like somewhere people can live in dignity. We should accept there have been mistakes made.

"We now have to make sure we go ahead and get this development put up."

The mast was put up in June 2005 on what was thought to be Highways land for which no planning permission was required. The council's estates department agreed the deal.

The council should have received in the region of £160,000 from developer Muir Housing for the land but instead must use £85,000 of the capital receipt to fund the relocation of the mast.

The committee agreed Coun Henderson's decision should be implemented but recommended the appropriate scrutiny committee look further into the matter to determine how the mast came to be put in place in the first place.