The Crown Prosecution Service has dropped all criminal charges against Sir Norman Bettison relating to his conduct as a South Yorkshire police chief inspector in the force’s response to the 1989 Hillsborough disaster.

Bettison, who was subsequently appointed chief constable of Merseyside and then West Yorkshire police, was charged last June with four counts of misconduct in a public office for statements he allegedly made about Hillsborough and his role, which the CPS claimed were untrue.

Bettison had made an application for the charges to be dismissed, which was due to be heard at Preston crown court on Tuesday, but the CPS barrister, Sarah Whitehouse QC, told the judge, Sir Peter Openshaw, that all four charges against Bettison were being withdrawn and the prosecution discontinued.

The collapse of the case against Bettison came as a profound disappointment to relatives of the people who were killed in a crush at Hillsborough while supporting Liverpool in the FA Cup semi-final against Nottingham Forest on 15 April 1989. The death toll was 96. Families have long been aggrieved about Bettison’s involvement for South Yorkshire police following the disaster, particularly as he went on to become the chief constable at Merseyside in 1998.

In a statement, Margaret Aspinall, the chair of the Hillsborough family support group, said members had “grave concerns about the handling of this case by the CPS”.

Bettison was not charged for his actual conduct or role in the South Yorkshire police’s response to the disaster. Instead, the CPS alleged that Bettison lied about his role in statements he made years later, in 1998 and 2012. Two charges alleged that in late 1998, during his application process for the Merseyside position, Bettison described his Hillsborough role as “peripheral” and told the Merseyside Police Authority he had “never attempted to shift blame on to the shoulders of Liverpool supporters”.

The two further charges related to press releases he issued in September 2012 after the Hillsborough Independent Panel published its report, in which he stated that he had never “besmirched” Liverpool supporters or suggested privately or publicly that they had caused the disaster.

Whitehouse told Openshaw the case was being discontinued because Mark Ellaby, a key witness to Bettison’s alleged statements whose evidence supported three of the charges, had died. Then, last week, the Independent Office of Police Conduct (IOPC) revisited another key witness, an 85-year-old woman, and “significant contradictions” emerged in her evidence.

There was “no longer a realistic prospect of conviction on three of the four charges”, Whitehouse said, which left the single charge that Bettison had lied in 1998 when he described his Hillsborough role as peripheral.

Paul Greaney QC, representing Bettison, told the court it had always been his client’s case that he was referring to his involvement on the day of the disaster as peripheral, not what he did in relation to South Yorkshire police’s response to it.

Whitehouse said the prosecution had been “reduced to the interpretation of a single word”,and the CPS decided that misconduct in a public office could no longer be proven to the “very high criminal standard” required.

In his speech to the court, Greaney criticised the IOPC, saying that for years its investigators had failed to pursue obvious lines of inquiry to sufficiently test the strength of the witness’s evidence.

He also criticised the Liverpool MP Maria Eagle for making speeches in parliament in 1998 and 2012 after the independent panel’s report, in which she highlighted Bettison’s role in the South Yorkshire police response. That work included Bettison going to parliament in November 1989, following Lord Justice Taylor’s landmark official report into the disaster, to show a group of MPs a video compilation.

In October 2012, Bettison resigned from his then position as chief constable of West Yorkshire police and retired. Further evidence of his work after the disaster emerged at the new 2014-16 inquests into the 96 deaths.

Greaney alleged that during its investigation, the IOPC had encountered “naked political interference” and came under “considerable political pressure to place the ‘peripheral’ issue at the heart of its investigation”.

In a short statement outside the court, Bettison said he had been “driven from the job” in 2012.

“My involvement in the events around Hillsborough has often been misrepresented, even in parliament,” he said. “Since then, I have been forced to deny, strenuously, that I was guilty of any wrongdoing in the aftermath of the disaster. Today’s outcome vindicates that position.”

Aspinall, whose 18-year-old son James was killed in the disaster, said: “We have grave concerns about the handling of this case by the CPS and can confirm that we will be exercising our right to an independent review under the right to review scheme.

“It is our view that the wrong charge was brought in the first place and we will be using the review process to argue this point strongly. We know how our supporters will feel about this decision and, of course, we all share all of those feelings.”

Pledging to “fight on” while saying that the families struggle at times to “find the strength to keep going”, Aspinall urged supporters to be restrained with any comment so as not to prejudice the continuing prosecutions against five other men.

David Duckenfield, the South Yorkshire police chief superintendent in command of the semi-final at Hillsborough, is charged with 95 counts of manslaughter by gross negligence.

Graham Mackrell, the former secretary and safety officer for Sheffield Wednesday, is charged with three breaches of safety legislation; former South Yorkshire police chief superintendent Donald Denton and chief inspector Alan Foster are charged with doing acts tending and intending to pervert the course of justice, as is the force’s former solicitor, Peter Metcalf.

Duckenfield’s trial, which is listed first, is due to start in January.