Controversial plans to replace Devon's local authorities with four new councils have been withdrawn by the government.

The plans announced in July proposed an enlarged Plymouth, Exeter and Torbay with a fourth council covering the rest of rural Devon.

Earlier this autumn ministers announced the plans had been "paused" pending a review Local Government Minister Jim McMahon promised Devon, along with all the other areas under review, would have a new set of proposals by early next year.

The changes are driven by the government's decision to replace the remaining county and district councils, like those in Devon, with unitarity authorities which deliver all council services under one roof.

Ministers also regard unitary authorities as the building blocks for devolution, although it was announced in the Budget that Devon could proceed with plans for a regional mayor ahead of the decision on council reorganisation.

The plans endorsed in July were those drawn up by the Labour-run city councils in Plymouth and Exeter.

They argued the large Devon Coast and Countryside Council covering most of the county was "specifically designed for rural and coastal communities, with services tailored to the challenges of dispersed, older, populations, market towns and isolated areas".

Critics dubbed it the "rural rump", an afterthought to the cities, and questioned its viability with almost all of Devon's major towns lying outside its borders. Opposition politicians also said the proposals selected were electorally favourable to Labour.

Decisions reached in other areas of the country proved similarly controversial and the government was facing legal challenges from several councils when it paused the plans in September.

Announcing the pause, Local Government Secretary Angela Rayner said: "In light of legal advice, I want to satisfy myself firstly that the right process is in place, that it is robust, and of course complies with the law." The local government minister has now said all of the different proposals submitted by councils across Devon were back on the table and "as such it should not be assumed the same proposal will automatically be selected".

Devon County Council leader Julian Brazil said the announcement left a "Halloween horror show hanging over us" and warned it brought "more chaos, cost and confusion to local authorities which are already facing significant challenges".

"Instead of getting a firm decision from government, we have had more delay and indecision, and now a U-turn on how much it will contribute financially," he said.

"This makes it incredibly difficult for councils to plan their budgets, workforce and future." He added the council would "continue to explore our legal options".

Tudor Evans, leader of Plymouth City Council, said: "Whilst we are disappointed that the government has decided to subject our local government reorganisation proposal to a further review process, this remains a once-in-a-generation opportunity to get local government reform right and that must remain the priority.

"We continue to believe our proposal offers the best future for Plymouth, Devon and Torbay and we will be ready to make that case when the review process begins." David Thomas, leader of Torbay Council, said he was "deeply disappointed and frustrated" by the move.

He said: "Over the past year, we have invested significant time, effort and public money in developing proposals and preparing for implementation.

"At a time when local government finances are already under pressure, it is extremely frustrating that so much work has been undertaken only for the process to be delayed, creating further uncertainty for councils, residents and businesses." While the minister has committed to all the new plans being published by the new year, he said some areas may hear sooner.