Tories want council house funds freed

TORY ACTIVISTS have surprised Labour and Liberal Democrat opponents by pressing the Government to relax rules preventing councils using council house sale receipts to build and repair homes - a policy for which the opposition parties have repeatedly argued.

A motion put down for the Conservative Party conference in October urges the Government to allow councils to use a greater proportion of the receipts 'in order to alleviate the serious problems of homelessness and to provide an economic boost to the building industry'.

Another calls on the Government to ensure that 'the public sector in partnership with the private sector are able to provide the necessary accommodation'.

Since 1990, local authorities have been allowed to spend only 25 per cent of the money raised from council house sales and 50 per cent of other capital receipts, such as those from selling land.

The rest, thought to total more than pounds 8bn, is frozen in bank accounts to redeem debt or earn interest. Under current rules, unfreezing it would adversely affect the public sector borrowing requirement, prompting calls for the rules to be rewritten.

Relaxation of the controls has long formed part of Labour and Liberal Democrat policy. Among Conservatives, only mavericks such as Sir Edward Heath, the former prime minister, have openly opposed Government policy.

Labour pledged in its election manifesto to release the receipts, arguing this would cut unemployment in the construction industries while ensuring more families would be rehoused.

Jack Straw, Labour's local government spokesman, said it was a sign of the desperation of Tory activists that they had to adopt Labour policy. 'I am glad that our arguments have at least penetrated them if not the Government. It is also an indication of the extent of the panic.'