The backers for the stadium were looking at a number of options to provide round-the-year use for the facility, and one such option for the £100million development was to entice Spurs into leaving White Hart Lane in favour of a switch to the proposed 43,000 capacity venue.
But the government have said that they cannot justify spending such a large amount of money on a stadium following an independent report.
The news that stadium plans have fallen through came in the same week that the club received planning permission for the East Stand expansion from Haringey Council.
Spurs owners ENIC may now decide to press ahead with raising the capacity of White Hart Lane to 44,000, but much depends on the council's plans for a regeneration of the surrounding area.
The club have also outlined future plans for the redevelopment the West Stand which could push the capacity close to 50,000, bringing Spurs into line with a number of Premiership clubs who have expanded their grounds or moved to a new stadium.
ENIC are still considering the possibility of moving away from The Lane but the Picketts Lock development was thought to be their first choice, and with plans for the expansion of the current ground gathering pace it seems Spurs may be staying put after all.