Prescott promises cut-price homes

Cut-price homes will be on sale for just £60,000 for first-time buyers in an effort to help low-paid workers priced out of the housing market, John Prescott announced yesterday.

Cut-price homes will be on sale for just £60,000 for first-time buyers in an effort to help low-paid workers priced out of the housing market, John Prescott announced yesterday.

The Deputy Prime Minister admitted that rapidly increasing numbers of families - many of whom work in hospitals, schools and town halls - had no chance of getting a foot on the property ladder. He told the conference: "We need these people, but many can't buy a home near where they work."

Under the scheme, which will be a pledge in next year's general election manifesto, the houses would be put up on surplus land owned by the health services, local authorities and other public bodies.

First-time buyers would only pay for the cost of the construction, but not of the land, an initiative that ministers believe could drive down the price of a two or even three-bedroom house to £60,000, compared with £200,000 on the open market.

The scheme, which would initially be piloted in the South-east but could be extended across England, would be aimed at "key workers", such as nurses, and social housing tenants. An estimated 10,000 would benefit initially, but more could follow if the move is a success.

"More and more young people want to own, but just can't afford it," Mr Prescott said. "Now some are waiting for prices to drop, but most can't get a mortgage." He added: "The gap between those who own a home and those who want one is widening. It's our job to help those first-time buyers who are unfairly priced out of the market."

The number of first-time buyers has slumped from 38 per cent in 1997 to 27 per cent last year as the effect of soaring house prices took its toll. The average new homeowner now has to raise £143,000, rising to £218,000 in London.

Mr Prescott accused house-builders, whose costs have risen by three times the cost of inflation since 1997, of riding a "gravy train" that had to be stopped. Ministers have drawn inspiration from a scheme in Germany, in which houses are manufactured in factories before being erected on site.

Mr Prescott also announced that the Government would be allocating more than £500m in public-private funding for councils to build new homes for rent or sale.

Hinting at further restrictions on the right-to-buy scheme, he said: "The receipts nowhere near cover replacement costs. The housing queue just gets longer. Instead of chasing the market with ever-increasing discounts, why don't we give more tenants an equity share which they can take with them?

"We can do a lot more to promote home ownership and still protect the existing social housing stock."

Earlier, Ian McCartney, the Labour chairman, opened the conference with a plea to delegates to have pride in the party's achievements and "the confidence to finish this incredible journey we have started".

He said: "If we are hungry enough, ambitious enough, if we leave Brighton inspired and motivated we can together make history. We can be the first Labour Party members to govern for a generation - in power for a generation not for its own sake but for a purpose: to create a society of opportunity for the many, not just the privileged few."

Amid growing concern in party ranks that support is slipping to the Liberal Democrats, he also warned anyone tempted to vote for the party as a protest would be helping the Tories back to power. "Don't believe the Liberal Democrats' chat-up lines. If you go to bed with Charles Kennedy, you wake up with Michael Howard."

Later, the Labour leadership suffered a defeat on housing, when delegates demanded that local authorities are given the same financial treatment as housing associations. Mr Prescott had dismissed the call, warning it would land the Treasury with a £5bn bill.