Nasa is fighting to save its next-generation space observatory, the James Webb Space Telescope. Politicians want to end the project – one of the most complex ever conceived by space engineers – even though billions of dollars have already been spent on its construction.

Scheduled for launch in 2016, the James Webb, intended to replace the ageing Hubble Space Telescope, would orbit in deep space, a million miles from Earth, and peer into the dawn of the universe. Its observations would answer major questions about the structure of the cosmos, say astronomers.

The cost of the observatory has soared from an initial estimate of $1.6bn (£996m) to more than $6.5bn (£4bn). As a result, budgets for other astronomical research projects have been slashed, leading the journal Nature to describe the James Webb as "the telescope that ate astronomy".

Last week the US House of Representatives' appropriations committee on commerce, justice, and science decided that it had had enough of these escalating costs and moved to cancel the project by stripping $1.9bn from Nasa's budget for next year.

A terse statement, released by the Republican-dominated committee, said that the project "is billions of dollars over budget and plagued by poor management". The decision still has to be approved by the full appropriations committee, the House and the Senate. Nevertheless, analysts say the telescope now faces a struggle to survive.

Not surprisingly, the move to scrap the telescope, which has been under construction since 2004 and is named after a former Nasa administrator, has horrified astronomers. The James Webb was intended to be the centrepiece of astronomical research for the next two decades. Its segmented mirror would be almost three times the diameter of the Hubble telescope's, and because it would orbit outside Earth's atmosphere it would be able to make observations of unprecedented accuracy. This would allow it to capture images from a time when the first stars and galaxies lit up the universe.

Tod Lauer, of the National Optical Astronomy Observatory in Tucson, said: "[Cancellation] would be an unmitigated disaster for cosmology. After two decades of pushing the Hubble to its limits, which has revolutionised astronomy, the next step would be to pack up and give up. The Hubble is just good enough to see what we're missing at the start of time." The James Webb would be able to fill in those gaps, he added.

The problem for engineers working on the telescope has been the complexity of its design. It will primarily gather infra-red radiation because most objects that interest astronomers emit light at these wavelengths. But this is a tricky process. The telescope must be cooled so that its own heat does not interfere with incoming infrared light. Similarly, it must be shielded from radiation from the Earth and the Sun, and so placed in deep space far beyond the point where it can be reached by astronauts.

Axing the project would have an impact beyond the US, however. Many other countries have committed large amounts of time and money to building components for the telescope. One example is the Mid-Infrared Instrument (Miri), which would analyse light gathered by planets forming from dust clouds around stars. This is a joint US-European project which has two project leaders, one British and one American.

Sarah Kendrew, a member of the Miri team, said she had been working on the project for four years. "We should be ready to ship the instrument to Nasa by the end of the year," she said. "All we can do is finish the job, I suppose, and give as much support as we can to our colleagues over there."