He also appeared to reject calls for a cut in stamp duty, saying: "Stamp duty is only 1% of the price of the house. The real issue is to bear down on the house price itself."

The Liberal Democrats warned that allowing housing association tenants to build up equity in their homes would simply reduce the available stock of social housing.

The party's housing spokesman, Ed Davey, accused Labour of entering a bidding war with the Conservatives over the right to buy of housing association homes.

He said: "The Dutch auction on extending right to buy fails to understand that it's independent charities, not government, that owns these houses.

"By extending right to buy to housing associations, both the Tories and Labour are hastening the slow death of social housing at a time when we need to build more."

The Conservatives, meanwhile, dismissed the proposals, accusing Tony Blair of having spent the last eight years trying to undermine the right to buy legislation.

"His government has slashed right to buy discounts, frozen stamp duty thresholds, and been responsible for council tax hikes of 70% - all combining to kick a whole generation off the housing ladder," said the shadow housing minister, John Hayes

"If Mr Prescott believes the right to buy to be a valuable aid in helping people to achieve their aspiration of home ownership, why has he spent eight years undermining it?"

Guardian Unlimited © Guardian Newspapers Limited 2005