PLANS to give more than a million housing association tenants the right to buy their homes have opened up Cabinet divisions between Alan Milburn and John Prescott.

The dispute threatens to revive Labour’s bitter ideological battles about the policy, pioneered by the Conservative Party in the 1980s, of selling off council houses to tenants at discounted prices.

Mr Milburn, Labour’s general election and policy co- ordinator, wants the right-to-buy policy extended to housing association tenants now excluded from the scheme. He has used a series of speeches in recent weeks to praise the Tory policy, arguing that property ownership is the route to greater social mobility, personal opportunity and equality.

But the Deputy Prime Minister, who is responsible for housing policy and is said to be increasingly irritated by Mr Milburn’s invasion of his territory, is resisting the idea. He has described the policy, which has resulted in more than 1.6 million house sales since 1980, as a “£19 billion disinvestment” in public housing.

Mr Prescott has already moved to restrict the right-to-buy policy and cut the maximum discount of £38,000 in certain areas, in an effort to protect the remaining stock of social housing.

Yesterday Mr Prescott announced that the Government would spend another £150 million on homelessness projects after it emerged that the number of people living in temporary accommodation had risen to more than 100,000, mainly owing to a lack of social housing.

The dispute is casting a shadow over Downing Street’s plan to put housing at the top of Tony Blair’s third-term agenda, with property ownership expected to be one of several “new offers” underpinning Labour’s next manifesto.

No 10 yesterday tried to minimise the scale of the dispute, saying that all sides were agreed on the need to help people on to the property ladder increase the stock of social housing. “We are all singing from the same song sheet,” insisted a senior adviser.

Mr Prescott’s Office of the Deputy Prime Minister will next month publish a five-year plan, including a programme to boost mixed social and private housing, particularly in more deprived communities. He has acknowledged that the Government needs to do more to address housing shortages and the problems of first-time buyers who cannot get on to the property ladder.

His programme will include a big expansion of social housing as part of a £3.3 billion investment over the next few years. It is also expected to provide further details of Mr Prescott’s scheme, announced at this year’s Labour conference, to build about 10,000 affordable family homes in the South East for the cost of just £60,000 each — compared with £200,000 on open market — on land still owned by the State. Officials acknowledged that there were differences over the right-to-buy policy and how far to extend property ownership. Mr Prescott is said to have scorned a recent proposal from Stephen Byers, the former Cabinet minister and Mr Milburn’s modernising ally, for allowing council tenants to transfer their right-to-buy discount into a deposit on a private house.

Mr Milburn has also exasperated Mr Prescott by pushing for reforms giving housing associations new rights to borrow private money “off the balance sheet” for developments.

In a speech last week, he identified housing as one of his key routes for creating more choice and opportunity. He said: “People should be enabled to realise their own aspirations for progress through childcare, skills and home ownership. A modern, progressive approach calls for choice to be redistributed, not ignored. Reforms to extend choice should be driven foward in education and housing, as well as hospitals and surgeries.”

Mr Prescott, by contrast, wants to cut waste and duplication in management of housing associations, rather than give them new freedoms. In a speech yesterday he said: “One of the problems is that one million houses were taken out of social housing by the right-to-buy and the money wasn’t used to build alternative housing. I inherited a total mess. I have got to deal with it. The five-year plan will show how we are providing homes for all.”

He announced an extra £150 million to refurbish hostels and to help voluntary organisations to deal with homelessness.

But Mr Prescott admitted that there were too many people classed as homeless who were living in temporary accommodation such as B&Bs and private rented accommodation.

The Deputy Prime Minister said that the five-year plan in January would increase the stock of affordable homes and allow more people to be moved out of temporary accommodation: “Since (coming to office) we have increased the amount of decent homes by one million, we have doubled the amount of housing investment.”

But Adam Sampson, director of the charity Shelter, said: “It is a scandal that 100,000 households, many of them families with children, are now facing Christmas in temporary accommodation.”

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