'Rent-to-buy' for tenants

Cash bonuses worth thousands of pounds are to be given to millions of council and housing association tenants to help give them a share in the equity of their homes.

Stephen Byers, the Secretary of State for Transport, will this week outline options for the scheme which the Prime Minister hopes will be as powerful at winning back Labour voters on run-down council estates as the Tories found the "right to buy" policy under Margaret Thatcher.

The Conservatives are certain to see the plans of Mr Byers as a direct bribe to Labour's heartlands. He has told Cabinet colleagues that the scheme could win over the thousands who declined to vote during the last election. Last night, Mr Byers emphasised that the plan was not a copy of the Thatcherite right to buy scheme, which reduced the housing stock.

He told The Independent on Sunday that the properties would still have tenants: "It means that if you decide to move, you get a payment."

More than three million council tenants and a million housing association tenants will be allowed to turn their rent into a nest egg that could be reinvested in their next home. The equity, which will rise with the market value of the property, could be cashed in if tenants decided to leave public-sector housing.

Mr Byers believes that a typical tenant in the north-east could gain more than the £2,500 deposit needed to buy privately in the area.