New council housing plan unveiled

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It is hoped the move, which is being consulted on, will enable councils to build more properties, boosting the supply of affordable homes.

Under the current system, some of the rental income received from council housing is pooled nationally and distributed to other councils through the Housing Revenue Account Subsidy System.

Three-quarters of all of the money raised through selling council houses under the Right to Buy scheme is also pooled.

Councils currently build only a few hundred homes each year, with the bulk of new social housing being built by registered social landlords.

Housing minister Margaret Beckett said she wanted local authorities to play a bigger role in the delivery of council housing.

She said: "We are determined to help keep house building going in the current climate, as the long-term need for more homes is not going to disappear.

"These new freedoms will encourage councils to play a bigger role in driving forward the delivery of new affordable homes for families in housing need."

The Government recently announced plans to enable councils to bid for a share of the grant given to social landlords to subsidise the cost of new housing.