London is cut out of £1.5bn housebuilding bonanza

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The Mayor of London criticised housing minister John Healey amid claims from City Hall that the capital was losing out to Labour-voting regions in the North - even though it had greater need.

The funding for the Premier's £1.5billion housebuilding plan was agreed last week, with Whitehall departments raiding their budgets to fund the project.

Although on paper London benefits from £207million earmarked for the homes plan, City Hall has now dug down into the final figures and unearthed what it says are cuts of £205.5million. That means a net benefit of just £1.5million. London loses out because six boroughs will not receive cash earmarked for repairs. It also suffers because a fund to bring empty private homes back into use is being axed.

The capital will also fail to attract funds for "new build" because difficulties in gaining suitable sites mean it cannot guarantee that developments will be completed within a year.

London's share of housing cash will drop even though it has the highest housing need. The North-East sees its budget double, while London's share drops by a third. The North-East has just 300 households in temporary accommodation, while London has 48,000 - three times more than the rest of the country combined.

Mortgage lending jumped by almost a fifth last month, raising hopes that banks are starting to make it easier to secure home loans. However, the £12.3 billion loaned - compared with £10.5 billion in May - is still only half last year's level, according to figures from the Council for Mortgage Lenders.